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NO.  94-82063 


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Author: 


Cox,  William  Eward 


Title: 


Cost  accounting  for  retail 
fuel  dealers 

Place: 

Seattle 

Date: 

1920 


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Cox,  William  Eward,  1887- 

...  Cost  accounting  for  retail  fuel  dealers,  by  William 
E.  Cox  ...    Seattle,  Wash.,  The  University,  1920. 

63  p.  incl.  forms.    25 J*".     (Bulletin  of  the  University  of  Washington. 
General  series,  no.  138,  July,  1920) 


1.  Fuel  trade — Accounting.    2.  Cost-^l^ccounting, 
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BULLETIN 
UNIVERSITY  OF  WASHINGTON 


GENERAL  SERFFS 


JULY.  1920 


NUMBER  138 


Cost  Accounting  for  Retail  Fuel  Dealers 


EY 


WILLIAM  r.  COX 

ASSISTAN-^   PROFESSOR,  CXDLLEGE  OF  BUSINESS  ADMINISTRATION 


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SEATTLE,  WASHINGTON 
t'UBLlSHED  QUAHTEItLy  BY  THE  UNIVERSITY 

1920 


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BULLETIN 
UNIVERSITY  OF  WASHINGTON 


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GENERAL  SERIES 


JULY,  1920 


NUMBER  138 


Cost  Accounting  for  Retail  Fuel  Dealers 


BY 


WILLIAM  E,  COX 

ASSISTANT  PROFESSOR,  COLLEGE  OF  BUSINESS  ADMINISTRATION 


f 


SEATTLE,  WASHINGTON 
PUBLISHED  QUARTERLY  BY  THE  UNIVERSITY 

1920 


entered  as  second  class  matter,  at  Seattle,  under  the  Act  of  July  16,  1894 


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CONTENTS 

Page 

Foreword  5 

acknowi.edgment . 7 

Introduction _^ 8 

EXPI^ANATION  OF  LKDGER  ACCOUNTS  : 

Asset 15 

LlABIUTY ... ; . 19 

Gross  Margin 20 

vShrinkage 24 

Uni^oading   24 

Deuvery 26 

Yard 28 

Overhead 29 

Miscellaneous  (non  cost  determining) 31 

Explanation  of  Forms  for  Auxiijary  Books  : 

A — Carlot  Purchase  Register 34 

B — Register  of  Pttrchases  from  Other  Retailers 35 

C — Recapitulation  OF  Carlot  Purchases 35 

D — Recapitulation  of  Purchases  from  Other  Retailers 35 

E— Sales  Sheet 36 

F — Recapitulation  of  Sales  Sheets , 39 

G— Time  Book 39 

H — Daily  Time  Report 39 

I — Order  Blank , 41 

J — Delivery  Ticket ^ 41 

K — Recapitulation  of  Retail  Tonnage  and  Cordage 41 

Exhibits  : 

A — General  Ledger  Accounts  Showing  Logical  Arrangement 45 

B — Depreciation 46 

C — Statement  of  Coal  and  Wood  Handled 47 

D — Divisors  for  Allocation  of  Expenses 48 

E — Allocation  of  Expenses 49 

F— Cost  Sheet 50 

G — Gross  Margins 51 

H — Profit  and  Loss  Statement 52 

I — Financial  Statement 54 


4  Contents 

Forms:  Page 

A — Carlot  Purchase  Register 56 

B — Register  of  Purchases  from  Other  Retailers 57 

C — Recapitulation  of  Carlot  Purchases 58 

D — Recapitulation  of  Purchases  from  Other  Retailers 58 

E— Sales  Sheet 59 

F — Recapitulation  of  Sales  Sheets 60 

G— Time  Book 61, 

H— Daily  Time  Report_ _:.... . 1 62 

I — Order  Blank —  62 

J — Delivery  Ticket j. 62 

K — Recapitulation  of  Retail  Tonnage  and  Cordage 63 


/ 


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1 


FOREWORD 

Business  is  constantly  becoming  more  professionalized.  The  plane  of  busi- 
ness competition  is  being  raised;  shrewdness  is  giving  way  to  trained  ability. 
For  many  years  industrial  activity  was  a  challenge  to  strategy.  Labor,  tn- 
dividually  or  collectively,  established  a  wage  after  a  protracted  period  of  bar- 
gaining. Raw  materials  were  bought  and  finished  products  sold  in  a  complicated 
net  work  of  discounts,  commissions  and  rebates.  Production  was  largely 
motivated  by  the  driving  energy  of  general  managers,  superintendents,  and  fore- 
men, while  the  consumption  of  goods  stolidly  followed  well-grooved  habits. 
Everyone  in  the  organization  bargained  and  manoeuvered  for  advantage  in  an 
environment  of  cleverness  and  especial  privilege. 

Although  many  business  men  still  think  and  act  in  terms  of  the  past,  an  in- 
creasingly large  number  appreciate  the  new  industrial  emphasis.  The  working 
man  is  no  longer  approached  as  a  given  quantity  of  energy  to  be  paid  a  standard 
or  customcpry  wage,  but  as  a  human  investment  capable  of  developing  an  almost  un- 
limited capacity.  A  large  number  of  human  appeals  have  been  developed  in  the 
effort  to  increase  productivity.  The  general  manager  no  longer  measures  output 
in  direct  relation  to  hours  of  labor  but  rather  analyzes  bonus  systems,  working 
conditions,  promotions,  labor  turnover,  absenteeism,  tardiness,  co-operative  man- 
agement and  shop  committees.  The  purchasing  department  is  giving  more  time 
to  the  quantity,  kind  and  quality  of  materials  while  the  marketing  division  has 
leofrned  to  appreciate  changing  conditions  in  demand.  The  first  characteristic  of 
a  profession  is  being  fulfilled— the  necessity  for  trained  abiltiy. 

The  production  and  distribution  of  products  is  a  service  and  not  solely  an 
activity  centering  in  profit.  When  production  and  needs  are  highly  localized  the 
general  economic  well-being  is  more  readily  appreciated  than  under  conditions 
of  modern  industry.  The  ordinary  economics  of  the  family  unit  would  curtail 
an  undue  application  of  capital  and  labor  in  non-essentials.  This  is  not  the  case  in 
the  larger  industrial  group  tvhere  the  relation  of  economy  and  profit  is  indirect. 
Not  only  should  land,  labor  and  capital  be  directed  toward  the  production  of  the 
most  essential  commodities  but  their  co-operation   should   be,  inspired   by   the 

5 


Foreword 


broadest  public  policy.  There  is  undoubtedly  a  growing  public  disposition  to  re- 
ward men  in  direct  relation  to  their  self-sacrifice  and  public  spirit.  Business  is 
but  an  opportunity  to  serve  the  needs  of  the  nation.  The  second  characteristic 
of  a  profession  is  the  desire  to  promote  the  welfare  of  society,  and  business  is 
rapidly  adjusting  itself  to  this  new  responsibility.  Trained  men  endowed  with 
the  spirit  of  public  service  must  in  due  time  develop  professional  pride,  and  with 
professional  pride  comes  the  fulfillment  of  the  third  characteristic  of  a  pro- 
fession. 

The  College  of  Business  Administration  of  the  University  of  Washington 
desires  to  promote  scientific  business  development.  In  furtherance  of  this  co- 
operation a  Bureau  of  Research  has  been  established  to  serve  as  a  clearing- 
house for  business  information.  The  present  bulletin  is  presented  as  an  aid  in 
fuel  retailing.  It  may  readily  happen  that  many  other  lines  of  business  activity 
have  problems  in  which  the  college  might  be  helpful.  The  following  depart- 
ments have  been  created:  Accounting ;  Business  Management;  Labor;  Finance; 
Insurance;  Employment  Management;  Marketing;  Sales;  Advertising;  Maritime 
Commerce;  Foreign  Trade;  Statistics;  Transportation;  Secretarial  Training;  In- 
vestments. 

Stephen  Ivan  Mhj^er,  Jr. 
Dean  of  College  of  Business  Administration. 


> 


^ 


ACKNOWLEDGMENT 

In  addition  to  the  publications  quoted  elsewhere  in  this  bulletin,  the  follow- 
ing pamphlets  have  been  found  most  suggestive : 

United  States  Federal  Trade  Commission,  "Fundamentals  of  a  Cost 
System  for  Manufacturers.''  July,  1916.    "A  System  of  Accounts 
for  Retail  Mer charts."    July,  1916. 

United  States  Fuel  Administration,  "A  System  of  Accounts  for  Retail 
Coal  Dealers."    November,  1917.    '''Publications."    1917-1918. 

United  States  Food  Administration,  "Suggested  Accounting  System  for 
Wheat  Flour  Millers  "    1918. 

Bureau  of  Business  Research,  Harvard  University,  "Bulletins  for  Retail 
and  Wholesale  Merchants"  1917-1919. 

The  College  of  Business  Administration  desires  to  express  its  appreciation 
of  the  services  rendered  by  Mr.  Harvey  S.  Jordan,  Commissioner  of  Retail  Coal 
Merchants  of  Seattle,  in  connection  with  the  preparation  of  this  pamphlet ;  and  to 
make  public  acknowledgment  of  its  indebtedness  to  Mr.  W.  C.  Bayles  of  Bayles 
Brothers,  Seattle,  for  his  invaluable  aid,  without  which  this  publication  could  not 
be  given  to  the  retail  fuel  dealers. 


\i 


^ 


INTRODUCTION 

In  Bradstreet's  Journal  of  January  31,  1920,  on  the  subject  of  Business 
Failures  and  their  Causes,  it  is  stated  "*  *  *  the  statistics  showed  that  the 
personal  element  was  the  mainspring  of  business  success  or  failure,  and,  speak- 
ing generally,  only  those  failed  who  lacked  the  essentials  of  good  business  equip- 
ment or  judgment.  *  *  *  Many  years  ago  Bradstreet's  Journal  established  the 
statistical  fact  that  business  success  or  failure  is  largely  personal — in  other 
words,  that  the  individual  himself  is  chiefly  responsible  for  failure  or  success. 
In  1918  the  proportion  of  failure  credited  to  causes  which  are  classed  as  orig- 
inating within  the  individual  himself  rose  to  its  highest  point,  86  per  cent.,  while 
outside  influences  were  credited  with  causing  14  per  cent.  The  1919  returns 
were  almost  identical  with  this,  85.9  per  cent,  being  credited  to  the  individual 
and  14.1  per  cent,  to  all  other  causes.  *  *  *  In  most  of  the  years  during  which 
these  statistics  have  been  collected.  Lack  of  Capital  led  all  others  in  responsi- 
bility for  failure.  This  was  true  from  1890  to  1912,  when  Incompetence  forged 
to  the  front.  In  1913  and  1914  Lack  of  Capital  again  took  the  lead,  but  in  1915 
Incompetence  resumed  first  place,  with  38.2  per  cent,  of  all  failures  credited  to 
it,  as  against  30.3  per  cent,  charged  to  Lack  of  Capital.  *  *  *  If  Incompetence 
and  Inexperience,  another  form  of  Incompetence,  are  combined,  it  is  found 
that  43.8  per  cent,  was  chargeable  to  these  kindred  causes,  and  the  three  above 
accounted  for  74.1  per  cent,  of  the  1919  failures,  *  *  *." 

Business  success  or  failure  depends  on  the  relation  of   income  and  ex- 
penditure.    So  long  as  the  income  exceeds  the  expenditure — the  true  expendi- 
ture— the  business  is  succeeding.  So  long  as  the  expenditure  exceeds  the  in- 
come the  business  is  failing.    The  one  of  course  means  a  profit,  the  other  a  loss. 
A  man  may  not  know  his  business,  he  may  not  know  how  to  buy  and  sell,  or 
how  to  manage,  he  may  not  know  many  things  necessary  to  succeed.     But  if  he 
knows  the  true  relation  between  his  income  and  expenditure,  if  he  knows  he  is 
losing  money  right  along,  he  may,  and  likely  will,  escape  disaster.     Business 
mortality  from  Incompetence  comes  from  not  knowing  that  loss  is  steadily  go- 
ing on.    The  knowledge  of  waste  comes  only  when  it  is  too  late.    There  are  ex- 
penditures which  are  seen  and  expenditures  which  are  unseen.    The  unseen  kind 
are  the  dangerous  ones.    A  motor  truck  depreciates  every  day.    Unpaid  interest 
and  taxes  are  accruing  right  along.     Prepaid  insurance  is  not  earned.     Most 
merchandise  deteriorates  from  day  to  day.     The  services  of  the  proprietor,  and 
of  the  unpaid  members  of  his  family  who  work  for  him,  are  worth  something. 
He  might  receive  rent  for  his  real  estate  and  interest  from  loaning  the  remainder 
of  his  investment,  if  these  were  not  used  in  his  business.     How  much  per  day 
for  these,  and  kindred  expenses?    And  how  much  do  they  add  to  the  cost  of 
each  unit  of  sale?    Most  men  know  the  invoice  cost  of  the  goods  they  sell,  how 
much  they  pay  out  for  freight,   rent,   insurance,   taxes,   repairs,  postage,   sta- 
tionery, what  their  pay  roll  amounts  to,  and  how  much  they  lose  from  bad  debts. 
But  most  men  do  not  know  the  cost  of  doing  business.    They  ignore  the  unseen 
items  of  expense.     They  do  not  build  up  and  separate  their  expenses  and  sales 
into  logical  groups,  so  the  one  may  be  divided  by  the  other  to  determine  the 
cost  per  unit.    When  a  sale  is  made  they  cannot  be  sure  whether  it  is  made  at 
a  profit  or  at  a  loss.     Unless  an  accounting  system  furnishes  this  information, 
unless  it  is  surrounded  by  checks  and  proofs  so  the  system  proves  itself  and 
proves  that  no  other  leaks  exist  than  those  accounted  for,  the  business  man 


),   i/vV 


/v 


Introduction  9 

cannot    be  said  to  know  his  business.    He  is  incompetent  and  belongs  in  Brad- 
street's class  where  business  mortality  is  high. 

A  uniform  system  of  accounting  and  cost-finding  is  very  desirable.  Com- 
petitors can  lose  nothing  of  value,  and  they  can  gain  much,  by  comparing  their 
results  with  the  results  of  their  neighbors.  Comparisons  cannot  properly  be 
made  without  uniformity  of  data.  Delivery  cost  per  unit  is  found  by  dividing 
the  total  cost  of  delivery  by  the  number  of  units  delivered.  If  the  total  cost  of 
delivery  is  built  up  in  different  ways  in  different  yards,  if  certain  expenses  are 
placed  in  the  delivery  group  in  one  yard  and  omitted  in  another,  if  the  deliv- 
ery units  are  not  alike,  the  results  are  useless  for  comparative  purposes. 
Leaks  and  inefficiency  can  sometimes  be  found  only  by  comparing  results  with 
those  of  another  dealer.  If  the  delivery  cost  per  ton  of  one  dealer  is  more 
than  that  of  another  dealer,  there  must  be  some  reason  for  this  difference.  One 
dealer  may  deliver  with  teams  and  another  with  trucks.  One  form  of  equip- 
ment may  be  more  efficient  and  economical  than  the  other.  One  dealer  may  un- 
load his  coal  into  a  gravity-bunker,  another  by  elevating  machinery,  and  an- 
other by  shoveling  by  hand.  One  may  save  a  considerable  amount  compared 
with  the  cost  of  his  neighbor.  On  the  other  hand  the  one  whose  cost  of  un- 
loading is  least,  may  break  his  coal  so  badly  in  handling  that  he  loses  as  much 
from  breakage  as  he  saves  in  unloading.  Men  cannot  be  said  to  know  their 
business  unless  they  know  these  things,  and  they  cannot  be  known  without 
some  method  of  comparison.  No  trade  secret  is  lost,  no  advantage  is  yielded, 
by  exchanging  efficiency  data  with  another  engaged  in  the  same  line  of  work. 
And  this  becomes  assured  if  such  exchange  data  pass  through  capable  and  dis- 
interested hands,  which  hand  back  only  the  material  results  without  communi- 
cating the  source  or  the  original  data. 

Competition  was  the  contn^Uing  factor  under  the  old  regime.  The  mod- 
ern method  of  governmental  price-fixing  has  not  met  with  general  approval. 
And  price-fixing  by  combinations  is  against  public  policy  and  forbidden  by 
law  .  It  may  be  a  new  era  is  in  formation:  one  in  which  ignorant  competition 
shall  be  discouraged  or  forbidden,  and  publicity  combined  with  intelligent  com- 
petition be  the  rule.  Publicity  is  the  taking  of  the  public  into  one's  confidence 
in  a  frank  and  honest  way,  by  frequently  laying  before  the  public  the  true  facts 
regarding  costs  and  profits.  The  public  is  willing  to  pay  a  reasonable  price  for 
efficient  service.  But  neither  inefficiency  in  operation  nor  exhorbitance  in  price 
is  likely  to  be  tolerated.  Ignorant  competition  tends  to  destroy  competition. 
If  persisted  in  the  efficient  will  leave  the  field,  the  weaker  competitors  will  be 
forced  out  of  business,  until  finally  a  monopoly  is  created  when  the  strongest 
alone  survives.  Competition  does  not  serve  its  highest  and  most  useful  pur- 
pose when  the  result  consists  solely  in  making  the  lowest  price.  Efficiency  and 
business  morality  cannot  be  maintained  when  men  are  driven  by  competition 
to  do  business  right  along  at  a  loss.  Society  is  best  protected  from  unfair  prices 
by  building  up  efficiency  and  high  moral  character  by  the  process  of  insuring 
protection  from  unfair  and  ignorant  competition. 

A  business  may  be  making  a  profit  in  one  department  and  losing  it  in  an- 
other. Exhibit  H  shows  a  net  profit  from  trading  of  $1163.93;  the  net  profit 
on  coal  was  $2036.14,  and  the  general  profits  were  reduced  because  wood  show- 
ed a  loss  of  $872.19.  Every  business  handling  more  than  one  class  of  com- 
modities should  be  departmentalized.  Dealers  in  coal  and  wood  who  handle 
sand  and  gravel,  ice,  or  building  material,  would  find  it  greatly  to  their  ad- 
vantage to  know  the  results  from  trading  in  each  of  these  departments,  and 
the  difficulty  of  departmentilization  is  more  imaginary  than  real. 


10 


Introduction 


Perhaps  it  should  here  be  said  that  the  gross  margins,  expenses,  costs,  pro- 
fits, losses  and  statistics,  shown  in  the  various  exhibits  in  this  bulletin,  while 
presenting  a  true  and  dependable  picture  of  the  retail  fuel  business  in  Seattle 
during  the  year  1919,  are  not  figures  from  any  one  yard  but  are  composite  fig- 
ures. 

The  business  described  in  this  bulletin  is  divided  into  two  departments, 
Coal  Department  and  Wood  Department.  An  understanding  of  the  simple 
principles  governing  their  separation  will  enable  one  to  divide  a  business  into  as 
many  departments  as  is  desirable.  The  cost  of  Shrinkage,  Unloading  and  De- 
livery of  each  is  kept  separate  from  the  start.  Yard  and  Overhead  Expenses, 
however,  from  their  very  nature,  cannot  properly  be  distributed  until  the  ac- 
counts have  been  built  up  and  the  statistical  divisors  found.  The  total  ex- 
pense of  unloading  coal  or  wood,  divided  by  the  number  of  tons  of  coal,  or 
cords  or  loads  of  wood,  unloaded,  evidently  will  give  the  cost  of  unloading  a 
unit  of  coal,  or  wood.  Likewise  the  total  cost  of  delivering  coal,  or  wood,  di- 
vided by  the  number  of  units  delivered,  will  give  the  delivery  cost  per  unit.  It 
is  very  simple  book-keeping  to  keep  several  accounts  showing  the  cost  of  op- 
erating teams,  or  trucks.  But  teams,  and  trucks,  may  deliver,  both  coal  and 
wood,  as  well  as  do  other  kinds  of  work.  As  men  drive  both  teams  and  trucks 
it  is  manifest  that  if  we  know  the  time  each  driver  puts  in  at  each  kind  of  work, 
we  at  once  know  how  to  divide  the  total  expense  between  the  various  depart- 
ments in  which  the  work  was  done.  If  we  know  how  much  it  costs  for  teams 
to  deliver  so  many  tons  of  coal,  or  so  many  loads  of  wood — and  how  much 
it  costs  for  trucks  to  deliver  so  many  units — the  cost  per  unit  for  teams,  and 
the  cost  per  unit  for  trucks,  is  quickly  found. 

It  is  not  difficult  to  split  this  further  and  keep  record  of  the  work  and  cost 
for  each  team  and  truck.  But  Yard  and  Overhead  expenses  must  be  divided  in 
a  more  arbitrary  way.  If  one  may  assume  that  a  ton  of  coal  and  a  half -cord 
load  of  wood  are  equivalent  units  of  cost,  that  they  should  bear  equal  shares  of 
Yard  and  Overhead  expenses,  then  the  number  of  units  of  each  passing  through 
the  yard  becomes  the  divisor  for  Yard  Expenses;  and  the  number  of  units  of 
each  which  are  sold  and  delivered  (after  adjusting  for  Sales  at  Yard)  becomes 
the  divisor  for  Overhead  Expenses.  The  skeleton  of  the  plan  is  to  arrange  the 
expenses  into  natural  groups,  and  to  keep  statistical  record  of  the  work  done, 
so  the  latter  may  be  a  true  divisor  of  the  former.  But  it  is  of  vast  importance 
that  the  expense  groups  contain  all  the  expenses — the  unseen  as  well  as  the 
seen — or,  like  when  sailing  at  sea  with  a  false  chart,  the  ship  may  go  upon 
the  rocks. 

The  Gross  Margin  Accounts  constitute  a  very  necessary  group.  Here 
the  sales  are  primarily  divided,  of  course,  into  two  departments.  Coal  and 
Wood.  Each  of  these  departments  is  then  subdivided  according  to  the  kind  of 
sales — Sales  Delivered,  Sales  at  Yard  and  Carlot  Sales.  If  we  deduct  from 
the  total  sales,  in  any  subdivision,  the  cost  of  the  material  sold,  the  remainder 
is  the  gross  margin.  Cost,  in  this  case,  is  not  the  operating  cost,  or  cost  of  hand- 
ling, but  the  initial  cost,  or  cost  of  the  material  delivered  on  cars,  or  boat,  at  the 
dealer's  yard.  Hence,  the  gross  margin  covers  both  the  operating  oost 
and  the  profit.  The  sum  of  the  operating  cost,  when  found,  plus  the  theoretical 
profit,  multiplied  by  the  number  of  units  sold  in  that  subdivision,  will  give  the 
total  theoretical  gross  margin  in  that  subdivision.  Comparing  this  theoretical 
gross  margin  with  the  actual  gross  margin  will  prove  the  accuracy  of  the  work. 

Accurate  cost  finding  being  essential  to  success,  a  Miscellaneous  Accounts 
group  is  provided  for  the  purpose  of  keeping  out  of  the  trading  revenue  and  ex- 


) 


X 


Introdi.'ctton 


11 


I 


^» 


pense  groups  those  items  of  income  and  outgo  which  attend,  but  do  not  belong 
with,  the  sale  of  merchandise. 

By  virtue  of  its  relationship  with  the  American  business  man,  the  Federal 
Trade  Commission  is  in  position  to  speak  authoritatively  on  the  advantage  of  an 
efficient  cost  system.  In  its  circular,  of  January  1916,  the  Commission  says  : 
"Among  the  several  methods  by  which  the  Federal  Trade  Commis- 
sion can  be  of  constructive  help  to  American  business,  there  are  two 
of  particular  importance.     One  of  these  is  to  aid  the  business  men  of 
the  country  in  obtaining  the  additional  credits  to  which  their  business 
operations  may  entitle  them.     The  second  is  to  aid  in  improving  ac- 
counting practice  and  in  establishing  better  standards  of  bookkeeping 
and  cost  accounting.     The  two  are  interdependent. 

"The  small  manufacturer,  the  country  storekeeper,  and  the  retail 
merchant  often  do  not  get  at  the  banks  the  credit  that  they  ought  to 
receive,  owing  to  the  fact  that  they  are  unable  to  present  balance 
sheets  in  accordance  with  good  business  practice.  These  men  as  a  rule 
are  just  as  good  business  men,  in  many  respects,  as  those  of  larger  op- 
erations. They  have  brains,  ability,  knowledge  of  their  wares  and  of 
their  customers,  but  they  do  not  speak  the  language  of  the  banker  in 
that  they  are  not  able  to  present  a  statement  showing  their  true  assets 
and  liabilities. 

t 

"Frequently  a  business  man  with  a  credit  of  a  few  hundred  dollars 
at  his  bank,  based  wholly  on  personal  grounds,  could,  if  he  could  pro- 
duce a  reliable  balance  sheet,  readily  obtain  sufficient  credit  to  enable 
him  to  rapidly  expand  his  business  along  sound  lines.  Failing  to  obtain 
such  credit,  his  business  is  limited  and  confined. 

"Ability  to  borrow  at  the  bank  has  a  far-reaching  effect  on  all  credit, 
because  to  the  bank,  primarily,  are  directed  inquiries  for  a  rating  of  a 
manufacurer  or  merchant  seeking  credit  for  goods.  An  unfavorable 
or  non-committal  report  from  the  bank  results  in  a  curtailment  of  op- 
portunity.   It  also  checks  expansion. 

"Bankers  are  in  business  to  loan  money  to  business  men,  and  recog- 
nize that  loans  made  on  balance  sheets  that  show  a  healthy  condition 
are  desirable  loans.  The  banker  will  welcome  any  standard  form  of 
statement  that  will  permit  him  easily  to  ascertain  the  exact  liabilities 
and  assets  of  his  customers. 

"It  is  recognized  that  no  one  standard  system  of  accounting  is  ap- 
plicable to  all  classes  of  business,  but  that  special  systems  are  required 
for  each  group  or  class  of  commerce  and  industry.  For  example,  the 
coal  .industry  can  use  a  substantially  standard  system  of  accounting, 
similarly,  the  country  store  and  general  store  retailer,  the  wholesale 
grocer,  the  retail  grocer,  the  boot  and  shoe  wholesaler,  the  drug  store, 
the  manufacturer  of  textiles,  the  manufacturer  of  machinery,  the 
wholesale  clothier,  the  retail  clothier.  It  is  true  that  a  great  many  sys- 
tems could  be  adapted  for  use  in  lines  other  than  those  for  which  they 
are  originally  arranged,  as  certain  fundamental  principles  underlie  the 
general  structure  of  accountancy  which  must  be  recognized  by  each 
group. 

"The  fact  must  be  admitted  that  in  order  to  put  a  selling  price  on 
a  product  a  manufacturer  must  first  know  what  it  costs  to  manufacture 
and  sell  it.  When  business  was  done  on  a  large  percentage  of  profit 


12  Introduction 

this  was  not  so  essential,  but  in  most  lines  of  industry  today  the  larger 
percentage  of  profit  has  passed.  Manufacturers  are  working  on  small- 
er margins  and  must  absolutely  know  what  their  goods  cost.  Any  un- 
reliable method  of  arriving  at  cost  figures,  with  margins  of  profit  so 
close,  must  be  eliminated. 

"It  is  a  fact  well  understood  among  business  men  that  the  general 
demoralization  in  a  large  number  of  industries  has  been  caused  by 
firms  who  cut  prices  not  knowing  what  their  goods  actually  cost  to 
manufacture,  and  the  cost  of  selling,  which  is  equally  important,  is 
almost  wholly  lost  sight  of. 

"A  manufacturer  who  does  not  know  with  a  close  degree  of  ac- 
curacy what  it  costs  him  to  produce  the  different  articles  he  manu- 
factures and  what  it  costs  him  to  sell  them,  is  not  in  a  position  to 
intelligently  meet  competition  and  invites  business  disaster. 

"Many  of  the  larger  manufacturers  have  thorough  cost  accounting 
systems,  which  they  recognize  as  necessary  in  order  to  give  them 
the  information  essential  to  successful  management.  On  the  other 
hand,  the  number  of  smaller  manufacturers  who  have  no  adequate 
cost  accounting  system  and  who  price  their  goods  arbitrarily  is  amazing. 

"Proper  accounting  for  the  smaller  manufacturer  is  most  essential. 
It  is  necessary  for  his  success  that  he  knows  on  what  particular  article 
he  is  making  a  fair  profit  and  on  what  he  is  making  only  a  narrow 
margin  of  profit  or  losing  money.  If  he  has  this  information  he  can 
concentrate  on  the  manufacture  and  sale  of  the  product  on  which 
the  profits  are  satisfactory. 

"Whole  industries,  in  many  instances,  are  suffering  from  a  general 
lack  of  intelligent  knowledge  of  cost." 

The  ascertainment  of  the  true  cost  of  doing  business  is  not  enough  to 
guarantee  reasonable  profit  for  the  business  man:  the  results  of  the  analyt- 
ical cost  system  must  be  effectively  utilized.  In  this  connection,  the  Bur- 
roughs Adding  Machinery  Company,  in  their  hand-book  "Statement  of  Bus- 
iness," suggests  on  "Fixing  Prices  to  get  a  Profit" : 

"Nine-tenths  of  all  retailers  are  making  less  than  they  think  they 
are.     They  are  always  surprised  w^hen  they  find  it  out. 

"When  you  sell  $1  worth  of  goods,  you  say  that  a  certain  percent 
of  that  is  profit,  a  certain  percent  goes  for  cost  of  doing  business  and 
the  balance  is  for  the  cost  of  the  goods. 

"Take  some  item  in  your  stock  and  deduct  the  two  percentages 
from  the  selling  price  you  have  established  and  see  if  you  still  have 
cost  price  left. 

"Your  profits  and  cost  of  doing  business  come  out  of  the  dollar 
you  take  in— not  out  of  the  60  or  70  or  80  cents  you  pay  out  for 
the  article. 

"If  you  buy  a  pair  of  shoes  for  $2  and  sell  them  for  $3,  your  profit 
comes  out  of  the  $3— not  the  $2.  The  profit  can  only  come  out  of 
the  selling  price. 

"Suppose  your  cost  of  doing  business  is  22%,  and  you  add  this  to 

the  cost  of  the  goods  and  then  add  10%   of  the  cost  price  for  the 

\         profit.    This  10%  net  profit  looks  good  on  paper,  but  that  is  the  only 


Y 


Introduction 

place  it  can  be  found.  It  isn't  in  the  cash  drawer  and  it  isn't  in  the 
bank. 

"If  you  think  you  could  make  a  good  profit  on  that  basis,  figure 
it  out.  Take  an  article  that  costs  $1.00,  add  22%  or  $.22  for  the  cost 
of  doing  business  and  then  $.10  for  profit,  making  the  selling  price 
$1.32.  Now  the  cost  of  doing  business  is  figured  on  the  selling  price 
and  is  therefore  22%  of  $1.32,  which  is  $.29  The  cost  of  the  article 
is  $1.00  and  subtracting  $1.29  from  $1.32  leaves  just  $.03  profit; 
or  a  trifle  over  2^%  profit  on  the  selling  price  instead  of  10%. 
You  can  get  4%  on  your  money  from  the  savings  bank. 

"Now  if  your  gross  business  was  $15,000.00  last  year  and  you 
figured  your  10%  profit  on  the  above  basis,  you  would  look  for 
$1,500.00  profit  in  the  bank:  but  instead  of  that  you  would  only  find 
2^%  of  the  $15,000.00  or  $337.50. 

"Here  is  the  way  the  selling  price  should  have  been  figured  out  if 
the  cost  to  do  business  is  22%  and  it  is  desired  to  make  10%  net 
profit.  We  want  to  find  the  selling  price  of  an  article  that  cost  $1.00; 
now  the  selling  price  is  made  up  of  the  cost  of  the  article,  the  cost 
to  do  business  "and  the  profit.  The  cost  to  do  business  is  22%  and  the 
profit  is  10%  ;  the  two  together  amount  to  32%.  The  selling  price 
is  represented  by  100%  and  if  the  cost  to  do  business  and  the  profit 
amount  to  32%  the  balance  of  68%  must  represent  the  cost  of  the  ar- 
ticle or  $1.00.  If  68^^  of  the  sellingr  pric^  is  $1.00  then  the  whole 
selling  price  is  100  divided  by  68  which  is  $1.47.  Therefore  to  make 
10%  profit  on  a  dollar  article  it  must  be  sold  for  $1.47." 


13 


SKELETON  OF  LEDGER  ACCOUNT  GROUPINGS 


— Real- 


— General — 


— Nominal — 


Ledger— 


Gross  Margins- 


Expenses— 


— Assets 

— Liabilities 

— Delivered  Sales 

—Coal 

— Yard  Sales 

*in'' 

— Carlot  Sales 

— Delivered  Sales 

Wood 

—Yard  Sales 

— Shrinkage — 

—Coal 
Wood 

— Carlot  Sales 
— Man  Work 

—Coal 

—Team  Work 
—Truck  Work 

— Unloading — 

— Man  Work 

Wood 

— Team  Work 
—Truck  Work 

— Teams 

— Coal 

—Trucks 

— Delivery 

—Hired  Equipment 
— Teams 

Wood 

— Trucks 

Yard 

Hired  Equipment 

—Overhead 

• 

\^ 


X'' 


-Outside  Income- 


Miscellaneous 


Personal- 


( Alphabetically  arranged) 
14 


THE  ACCOUNTS  AND  THEIR  EXPLANATIONS 

The  ledger  accounts  are  separated  into  two  primary  groups,  general 
and  personal.  The  personal  accounts  are  arranged  in  alphabetical  order.  The 
general  accounts  are  divided  into  real  and  nominal  accounts.  Real  accounts 
are  divided  into  assets  and  liabilities.  The  nominal  accounts  are  divided  into 
gross  margin  accounts,  expense  accounts,  and  outside  income  accounts.  Ex- 
pense accounts  are  divided  into  shrinkage  accounts,  unloading  accounts,  deliv- 
ery accounts,  yard  accounts,  and  overhead  accounts.  Outside  income  is  a 
miscellaneous  group  which  includes  all  general  ledger  accounts  not  affecting 
cost  determination.  The  gross  margin  and  expense  groups  are  generally  di- 
vided into  coal  and  wood  groups,  and  these  are  again  divided  as  is  shown  more 
clearly  in  the  accompanying  diagram,  Skeleton  of  Ledger  Account  Group- 
ings. The  symbols  are  used  with  the  index  number  of  the  general  accounts 
to  enable  the  bookkeeper  to  start  new  accounts  which  may  be  inserted  in  the 
proper  logical  place  without  disturbing  the  general  index  number.  For  ex- 
ample, if  it  is  desired  to  start  a  new  account  to  be  inserted  immediately  after 
A-3,  the  existing  account  can  be  marked  A-3a  and  the  added  one  A-3b,  it  be- 
ing essential  that  the  logical  arrangement  of  the  general  accounts  be  main- 
tained. 

REAL  ACCOUNTS 

Asset  Accounts,  (Symboi.  A) 

A-1.     Cash. 

In  this  system,  the  Cash  Book  itself  may  be  the  ledger  account  with  cash; 
the  Cash  Book  being  the  book  of  original  entry  and  at  the  same  time  a  ledger 
account.  All  receipts  of  cash  are  entered  on  the  left  hand  page  of  the  Cash 
Book  aiid  all  cash  disbursements  are  entered  on  the  right  hand  page  of  the 
Cash  Book.  When  the  trial  balance  is  made  the  totals  of  the  Cash  Book  are 
used  exactly  the  same  as  any  other  ledger  account.  At  the  end  of  each  month 
the  Cash  Book  should  be  ruled  and  the  balance  be  brought  down.  As  an  al- 
ternative for  using  the  Cash  Book  as  the  ledger  account,  the  dealer  may  pur- 
sue the  plan  of  transferring  the  totals  of  the  Cash  Book  to  a  cash  account  in 
the  Ledger;  a  separate  account  may  be  kept  with  cash  in  office  and  cash  in 
bank  if  desired. 

A-2.     Notes  Receivable. 

Charge  this  account  with  all  notes,  trade  acceptances  and  other  evidences 
of  indebtedness  received  in  settlement  of  any  account,  and  credit  this  account 
when  such  items  are  paid. 

A-3.     Accounts  Receivable. 

For  the  purpose  of  keeping  the  system  as  simple  as  possible,  even  though 
there  is  a  ledger  page  for  this  account  and  a  corresponding  one  for  Accounts 
Payable,  L-2,  nothing  is  to  be  posted  to  either  of  these  accounts.  They  are 
placed  in  the  Ledger  merely  to  indicate  their  proper  place  on  the  balance  sheet. 
When  the  balance  sheet  or  financial  statement  is  made,  the  total  of  the  debit 
balances  of  the  personal  accounts  is  used  as  the  amount  of  Accounts  Receivable 
and  the  total  of  the  credit  balances  of  the  personal  accounts  is  used  as  Accounts 
Payable,  and  are  shown  as  such  on  the  balance  sheet. 

15 


16 


Cost  Accounting 


A-4.     Reserve  for  Bad  Debts. 


For  Retaii.  Fuel  Dealers 


17 


This  account  is  not  an  asset,  being  placed  here  only  in  the  interest  of 
clearness,  as  a  proper  deduction  from  Accounts  Receivable,  in  order  that  the 
financial  statement  may  show  the  most  exact  possible  picture  of  the  net  amount 
of  Accounts  Receivable  on  v^hich  the  dealer  may  depend.  At  the  end  of  the 
period,  this  account  is  to  be  credited  and  Losses  from  Bad  Debts,  0-8, 
is  to  be  charged  with  an  amount  thought  necessary,  estimated  from  past 
experience,  to  cover  the  probable  losses.  When  an  actual  loss  has  occurred, 
this  account,  A-4,  is  to  be  charged  and  the  proper  personal  account  credited 
with  the  loss. 

A-5.    Coal  Stock. 

This  account  starts  at  the  beginning  of  each  year  with  the  inventory  of 
coal  as  a  debit  item.  Through  the  period  it  is  charged  monthly  with  the  pur- 
chases of  coal  in  carload  lots  and  purchases  from  other  dealers,  and  also  with 
the  total  amount  of  freight  paid  on  coal,  as  will  be  explained  in  the  next  ac- 
count. At  the  end  of  the  period,  this  account  is  to  be  credited  with  the  ex- 
cess cost  of  coal  bought  from  other  dealers,  as  explained  in  G-9,  and  also  with 
the  cost  of  coal  as  explained  in  accounts  G-4,  G-16  and  G-18.  When  degrada- 
tion and  loss  on  coal  is  found,  as  described  in  the  explanation  of  Form  E,  A-5 
must  be  credited  and  S-1  debited  with  the  proper  amount  of  degradation  and 
loss. 

A-6.     Freight  on  Coal. 

All  freight  paid  by  the  dealer  (not  chargeable  to  shipper)  on  coal  is  to  be 
charged  to  this  account.  At  the  end  of  the  month  this  account  is  to  be  credited 
and  Coal  Stock,  A-5,  charged  with  the  debit  balance.  As  the  freight  on  coal  finds 
its  way  monthly  into  Coal  Stock,  A-5,  the  reason  it  is  charged  to  A-6  and  not  to 
A-5  is  to  keep  a  check  on  the  freight  bills  and  insure  that  none  are  paid  twice. 
The  debit  in  this  account  should  equal  the  footings  of  the  freight  column  for 
coal  from  the  Carlot  Purchase  Register  covering  the  same  period. 

A -7.     Wood  Stock. 
This  account  is  treated  for  wood  exactly  as  account  A-5  is  treated  for  coal. 

A-8.     Freight  on  Wood. 
This  account  is  treated  for  wood  just  as  account  A-6  is  treated  for  coal. 

■  A-9.  Operating  Supplies. 

This  account,  like  A-3  and  L-2,  is  placed  in  the  Ledger  merely  to  indicate 
its  place  on  the  financial  statement  but  nothing  is  posted  to  this  account.  The 
inventory  amounts  for  office  supplies,  automobile  supplies,  truck  supplies,  feed 
and  team  supplies  and  blacksmith  shop  supplies  are  posted  to  the  proper  leg- 
ger  accounts,  0-5,  0-7,  D-14,  D-9  and  D-19,  and  will  show  up  as  debit  balances 
in  these  accounts.  All  of  these,  however,  are  expense  accounts,  and  for  cost 
finding  purposes,  it  is  necessary  that  these  inventory  balances  be  removed  from 
the  expense  groups;  otherwise,  the  amount  of  goods  on  hand  would  be  count- 
ed in  the  total  of  its  group  of  expenses  and  increase  the  cost  figure.  For  this 
reason,  the  inventory  debit  balances  remain  in  their  proper  places  on  the  Led- 
ger and  are  not  shown  on  the  cost  sheets,  but  are  taken  and  placed  on  the  fi- 
nancial  statement   under  the   heading   Operating   Supplies.     By   this   method, 


V 


they  appear  among  the  assets  where  they  belong  and  do  not  disturb  the  ex- 
pense accounts  when  used  for  cost  finding  purposes. 

A-10.     Prepaid  Insurance. 

Charge  this  account  with  the  premiums  paid  on  all  insurance  policies.  At 
the  end  of  the  period,  a  schedule  is  made  of  the  amount  of  insurance  expired  on 
each  kind  of  property  and  the  amount  unexpired.  The  proper  expense  ac- 
counts should  be  charged  and  this  account  credited  with  the  amount  expired. 
The  debit  balance  then  represents  the  amount  unexpired  and  appears  on  the 
financial  statement  as  an  asset  under  the  heading  Deferred  Charges  to  Oper- 
ations. 

A-IL     Prepaid  Rent. 

This  account  must  be  carefully  distinguished  from  O-L  Charge  this  ac- 
count with  all  payments  of  rent.  At  the  end  of  the  period,  the  amount  expired 
to  date  is  found,'  and  the  amount  which  is  unexpired.  Charge  O-l  and  credit 
this  account  A-U  with  the  amount  expired  and  bring  down,  as  a  debit  balance 
in  this  account,  the  amount  unexpired. 

A- 12.     Prepaid  Credit  Associations. 

Charge  this  account  with  all  payments  to  the  credit  associations  and  at 
the  end  of  the  period  determine  the  amount  which  has  been  earned  and  the 
amount  unearned.  Charge  account  0-9  and  credit  this  account,  A- 12,  with  the 
amount  earned,  bringing  down,  as  a  debit  balance  in  this  account,  the  amount 

unearned. 

A-13.     Prepaid  Commissioner.    ' 

In  Seattle,  the  fuel  dealers  have  employed  an  accountant  who  performs 
a  number  of  duties  and  who  bears  the  title  of  Coal  Commissioner.  His  ser- 
vices are  paid  from  a  fund  created  by  assessments  on  the  fuel  dealers  and  such 
assessment  are  prepayments.  Charge  this  account  with-  all  such  paynients, 
and,  at  the  end  of  the  period,  determine  the  amount  earned  by  the  commissioner 
to  that  date  and  the  amount  unearned.  Charge  account  0-9  and  credit  this 
account  with  the  amount  earned,  and  bring  down,  as  a  debit  balance  in  this 
account,  the  amount  unearned. 

A-14.     Miscellaneous  Deferred  Charges. 

It  sometimes  happens  that,  at  the  end  of  the  cost  finding  period,  some 
payments  have  been  made  which  really  belong  in  the  succeeding  period  and 
for  which  there  has  been  no  special  account  provided.  For  example, 
at  the  close  of  the  cost  finding  period,  the  sawn  wood  on  hand  represents  a 
certain  amount  for  sawing  which  is  a  deferred  charge  and  which  cannot  prop- 
erly be  included  in  the  gross  margin  for  the  period  just  closing.  Such  itjms 
should  be  removed  and  charged  into  this  account  until  after  the  new  year  ac- 
counts have  been  opetied  when  they  can  be  tranferrd  to  the  original  accounts. 

A- 15.     Land. 

Debit  this  account  with  the  purchase  price  of  land  used  in  the  business. 
In  any  revaluation  of  land,  or  other  property  not  for  sale,  if  the  new  valua- 
tion is  greater  than  the  book  valuation,  it  is  deemed  best  to  show  the  increase 
by  crediting  an  account  named  Appreciation  Valuation  so  as  to  keep  such  in- 


INTENTIONAL  SECOND  EXPOSURE 


16 


Cost  Accounting 


A-4.     Reserve   for  Bad  Debts. 


For  Retaii.  Fuel  Dealers 


17 


This  account  is  not  an  asset,  being  placed  here  only  in  the  interest  of 
clearness,  as  a  proper  deduction  from  Accounts  Receivable,  in  order  that  the 
financial  statement  may  show  the  most  exact  possible  picture  of  the  net  amount 
of  Accounts  Receivable  on  which  the  dealer  may  depend.  At  the  end  of  the 
period,  this  account  is  to  be  credited  and  Losses  from  Bad  Debts,  0-8, 
is  to  be  charged  with  an  amount  thought  necessary,  estimated  from  past 
experience,  to  cover  the  probable  losses.  When  an  actual  loss  has  occurred, 
this  account,  A-4,  is  to  be  charged  and  the  proper  personal  account  credited 
with  the  loss. 

A-5.     Coal  Stock. 

This  account  starts  at  the  beginning  of  each  year  with  the  inventory  of 
coal  as  a  debit  item.  Through  the  period  it  is  charged  monthly  with  the  pur- 
chases of  coal  in  carload  lots  and  purchases  from  other  dealers,  and  also  with 
the  total  amount  of  freight  paid  on  coal,  as  will  be  explained  in  the  next  ac- 
count. At  the  end  of  the  period,  this  account  is  to  be  credited  with  the  ex- 
cess cost  of  coal  bought  from  other  dealers,  as  explained  in  G-9,  and  also  with 
the  cost  of  coal  as  explained  in  accounts  G-4,  G-16  and  G-18.  When  degrada- 
tion and  loss  on  coal  is  found,  as  described  in  the  explanation  of  Form  E,  A-5 
must  be  credited  and  S-1  debited  with  the  proper  amount  of  degradation  and 
loss. 

A-6.     Freight  on  Coal. 

All  freight  paid  by  the  dealer  (not  chargeable  to  shipper)  on  coal  is  to  be 
charged  to  this  account.  At  the  end  of  the  month  this  account  is  to  be  credited 
and  Coal  Stock,  A-5,  charged  with  the  debit  balance.  As  the  freight  on  coal  finds 
its  way  monthly  into  Coal  Stock,  A-5,  the  reason  it  is  charged  to  A-6  and  not  to 
A-5  is  to  keep  a  check  on  the  freight  bills  and  insure  that  none  are  paid  twice. 
The  debit  in  this  account  should  equal  the  footings  of  the  freight  column  for 
coal  from  the  Carlot  Purchase  Register  covering  the  same  period. 

A -7.     Wood  Stock. 
This  account  is  treated  for  wood  exactly  as  account  A-5  is  treated  for  coal. 

A-8.     Freight  on  Wood. 
This  account  is  treated  for  wood  just  as  account  A-6  is  treated  for  coal. 

A-9.  Operating  Supplies. 

This  account,  like  A-3  and  L-2,  is  placed  in  the  Ledger  merely  to  indicate 
its  place  on  the  financial  statement  but  nothing  is  posted  to  this  account.  The 
inventory  amounts  for  office  supplies,  automobile  supplies,  truck  supplies,  feed 
and  team  supplies  and  blacksmith  shop  supplies  are  posted  to  the  proper  leg- 
ger  accounts,  0-5,  0-7,  D-14,  D-9  and  D-19,  and  will  show  up  as  debit  balances 
in  these  accounts.  All  of  these,  however,  are  expense  accounts,  and  for  cost 
finding  purposes,  it  is  necessary  that  these  inventory  balances  be  removed  from 
the  expense  groups;  otherwise,  the  amount  of  goods  on  hand  would  be  count- 
ed in  the  total  of  its  group  of  expenses  and  increase  the  cost  figure.  For  this 
reason,  the  inventory  debit  balances  remain  in  their  proper  places  on  the  Led- 
ger and  are  not  shown  on  the  cost  sheets,  but  are  taken  and  placed  on  the  fi- 
nancial  statement   under  the   heading   Operating   Supplies.      By   this   method. 


n 


they  appear  among  the  assets  where  they  belong  and  do  not  disturb  the  ex- 
pense accounts  when  used  for  cost  finding  purposes. 

A-10.     Prepaid  Insurance. 

Charge  this  account  with  the  premiums  paid  on  all  insurance  policies.  At 
the  end  of  the  period,  a  schedule  is  made  of  the  amount  of  insurance  expired  on 
each  kind  of  property  and  the  amount  unexpired.  The  proper  expense  ac- 
counts should  be  charged  and  this  account  credited  with  the  amount  expired. 
The  debit  balance  then  represents  the  amount  unexpired  and  appears  on  the 
financial  statement  as  an  asset  under  the  heading  Deferred  Charges  to  Oper- 


ations. 


A-IL     Prepaid  Rent. 


This  account  must  be  carefully  distinguished  from  O-L  Charge  this  ac- 
count with  all  pavments  of  rent.  At  the  end  of  the  period,  the  amount  expired 
to  date  is  found,'  and  the  amount  which  is  unexpired.  Charge  O-l  and  credit 
this  account  A-11  with  the  amount  expired  and  bring  down,  as  a  debit  balance 
in  this  account,  the  amount  unexpired. 

A-12.     Prepaid  Credit  Associations. 

Charge  this  account  with  all  payments  to  the  credit  associations  and  at 
the  end  of  the  period  determine  the' amount  which  has  been  earned  and  the 
amount  unearned.  Charge  account  0-9  and  credit  this  account,  A-12,  with  the 
amount  earned,  bringing  down,  as  a  debit  balance  in  this  account,  the  amount 

unearned. 

A-13.     Prepaid  Commissioner.    ' 

'  In  Seattle,  the  fuel  dealers  have  employed  an  accountant  who  performs 
a  number  of  duties  and  who  bears  the  title  of  Coal  Commissioner.  His  ser- 
vices are  paid  from  a  fund  created  by  assessments  on  the  fuel  dealers  and  such 
assessment  are  prepayments.  Charge  this  account  with-  all  such  paynients, 
and,  at  the  end  of  the  period,  determine  the  amount  earned  by  the  commissioner 
to  that  date  and  the  amount  unearned.  Charge  account  0-9  and  credit  this 
account  with  the  amount  earned,  and  bring  down,  as  a  debit  balance  in  this 
account,  the  amount  unearned. 

A-14.     Miscellaneous  Deferred  Charges. 

It  sometimes  happens  that,  at  the  end  of  the  cost  finding  period,  some 
payments  have  been  made  which  really  belong  in  the  succeeding  period  and 
for  which  there  has  been  no  special  account  provided.  For  example, 
at  the  close  of  the  cost  finding  period,  the  sawn  wood  on  hand  represents  a 
certain  amount  for  sawing  which  is  a  deferred  charge  and  which  cannot  prop- 
erly be  included  in  the  gross  margin  for  the  period  just  closing.  Such  items 
should  be  removed  and  charged  into  this  account  until  after  the  new  year  ac- 
counts have  been  opened  when  they  can  be  tranferrd  to  the  original  accounts. 

A-15.     lyand. 

Debit  this  account  with  the  purchase  price  of  land  used  in  the  business. 
In  any  revaluation  of  land,  or  other  property  not  for  sale,  if  the  new  valua- 
tion is  greater  than  the  book  valuation,  it  is  deemed  best  to  show  the  increase 
by  crediting  an  account  named  Appreciation  Valuation  so  as  to  keep  such  in- 


18 


Cost  Accounting 


For  Retaii.  Fuel  Dealers 


19 


crease  separate  from  the  proprietor's  investment,  or  the  corporation  surplus, 
charging  such  increase  to  Land  or  other  account  carrying  such  appreciated  prop- 
erty. This  increase  in  vahie  is  not  to  be  distributed  as  dividends  or  profits.  If, 
however,  such  property  has  decreased  in  value,  it  is  deemed  best  to  charge 
the  proprietor's  investment,  or  surplus  account  in  case  of  a  corporation,  with 
such  decrease,  and  credit  the  account  carrying  the  asset. 

A-16.     Buildings. 

Charge  this  account  with  the  cost  of  all  buildings  used  in  the  business, 
treating  any  increase  or  decrease  in  the  valuation  according  to  the  principles 
laid  down  in  the  description  of  account  A-15.  Repairs,  taxes  and  depreciation 
on  buildings  are  charged  to  accounts  M-3,  M-4  and  M-5.  The  original  asset 
account  should  not  be  changed  from  the  cost  price  until  such  time  as  the  as- 
sets are  worn  out  and  are  taken  care  of  by  the  depreciation  entries. 

A-17.     Yard  Equipment. 

Charge  this  account  with  equipment  used  in  the  yard  which  is  im- 
movable and  which  does  not  belong  to  the  class  commonly  called  buildings :  for 
example,  railroad  tracks,  wagon  scales  and  fire  equipment.  Repairs,  taxes  and 
depreciation  on  yard  equipment  should  be  charged  to  accounts  M-3,  M-4  and 
M-5.  The  original  asset  account  should  not  be  changed  from  the  cost  price 
until  such  time  as  the  assets  are  worn  out  and  are  taken  care  of  by  the  depre- 
ciation entries. 

A-18.    Movable  Equipment. 

Charge  this  account  with  the  cost  price  of  all  equipment  used  in  the  bus- 
iness (except  office  furniture)  which  is  movable,  such  as  trucks,  teams,  wag- 
ons, harness,  small  tools,  electric  wagon  loader  and  automobile  used  in  the 
business.  Charge  all  repairs,  taxes  and  depreciation  to  the  proper  accounts, 
such  as  D-7,  D-S,  D-10,  D-12,  D-13,  D-15,  D-17,  D-18,  D-20,  O-IO,  O-ll  and 
0-12.  The  original  asset  account  should  not  be  changed  from  the  cost  price 
until  such  time  as  the  assets  are  worn  out  and  are  taken  care  of  by  the  depre- 
ciation entries. 

A- 10.     Office  Furniture. 

Charge  this  account  with  cost  of  all  furniture  used  in  the  of- 
fice, such  as  desks,  tables,  stools,  adding  machines,  typewriter,  etc.,  but  do  not 
charge  this  account  with  such  items  as  stationer}',  books,  etc.,  which  belong  in 
account  0-5.  Charge  repairs,  taxes  and  depreciation  on  office  furniture  to 
accounts  O-IO,  Oil   and  0-12. 

A-20.     Reserve  for  Depreciation. 

Exhibit  B  shows  the  method  of  figuring  depreciation  adopted  in  this 
pamphlet.  It  will  be  noted  that  the  straight  line  method  is  used.  This  is  done 
because  it  is  the  method  used  by  the  Federal  Income  Tax  authorities,  and  it 
is  deemed  best  that  accounting  should  be  kept  in  conformity  with  government- 
al method.  This  method  is  defective  to  the  extent  that  when  property  is  new 
and  at  the  height  of  its  efficiency  and  the  repair  bills  at  the  minimum,  the 
charge  for  depreciation  is  no  more  than  it  is  at  the  end  of  the  period  when  the 
property  is  run  down  and  the  repair  bills  are  high.  But  it  is  deemed  expedient 
to  forego  a  better  method  and  adopt  a  poorer  one  in  order  that  the  same  ac- 
counts may  be  used  both  in  making  out  the  Income  1  ax  Return  and  in  cost  find- 


A 


ing  where  depreciation  is  an  expense.  If  $3,000  was  consumed  in  five  years  in 
the  wear  and  tear  of  a  motor  truck,  it  must  be  obvious  that  there  was  an  ex- 
pense of  $600  for  each  year  or  $50  for  each  month  during  the  time  the 
truck  was  run.  If  this  $50  were  paid  each  month,  it  would  be  obvious 
that  it  was  an  expense  item.  However,  many  people,  in  the  beginning,  pay  the 
entire  purchase  price  of  the  truck  and  then  forget  that  it  is  wearing  out  and 
decreasing  in  value  every  day. 

L,iabiIvITy  Accounts,  (Symbol  L) 

1,-1.     Notes  Payable. 

Credit  this  account  with  all  notes  and  trade  acceptances  given  to  others 
and  charge  this  account  when  the  same  are  paid.  The  credit  balance  in 
this  account  will  then  show  the  written  obligations  of  the  dealer. 

L-2.     Accounts  Payable. 
See  description  of  A-3. 

E-3.     Accrued  Interest  Payable. 

At  the  end  of  the  year,  or  cost  finding  period,  credit  this  account  and 
charge  Interest  Paid,  0-2,  Avith  all  interest  earned  and  not  yet  paid.  When 
such  interest  is  paid,  the  entry  should  be  split,  charging  this  account,  E-3,  with 
the  amount  earned  to  the  end  of  that  period  and  charging  Interest  Paid,  0-2, 
with  the  amount  earned  after  the  close  of  that  period. 

L-4.     Accrued  Taxes. 

At  the  end  of  the  year,  or  cost  finding  period,  ascertain  from  the  County 
Assessor  the  assessed  valuation  of  the  property  and  the  tax  rate,  and  compute 
the  taxes  earned  to  date,  charging  the  expenses  accounts  D-12,  D-17,  O-ll  and 
M-4  and  crediting  the  total  to  this  account,  L-4.  When  the  taxes  are  paid, 
charge  the  payment  to  this  account  and  make  the  entries  necessary  to  correct 
any  miscalculation. 

L-5.     Accrued  Wages. 

At  the  end  of  each  month,  a  distribution  of  pay  roll  is  made  from  the 
monthly  Time  Book  charging  the  proper  expense  accounts  and  crediting  this 
account,  L-5,  with  the  total  of  all  wages  earned  during  the  month.  As  wages 
are  paid,  the  payments  are  charged  to  this  account  .  The  credit  balance  in  this 
account  will  represent  the  unpaid  wages  earned.  It  is  quite  probable  that  the  Time 
Book  for  any  given  month  will  be  distributed  as  late  as  the  middle  of  the  succeed- 
ing month  and  the  balance  in  this  account,  L-5,  be  disturbed  by  payments  made  in 
the  latter  month.  It  will  facilitate  the  accountant's  work  if  he  uses  separate  ledger 
pages  for  each  month :  Accrued  Wages,  January ;  Accrued  Wages,  February ;  etc. 
When  the  distribution. is  made,  along  with  any  necessary  correcting  entries,  the 
past  month  may  easily  be  balanced,  ruled-up  and  disposed  of  without  disturbing 
the  arrangement  of  the  ledger  items  of  the  current  or  later  month. 

L-6.     Mortgages  Payable. 

When  a  mortgage  is  given,  this  account  is  credited;  when  the  mortgage  is 
paid,  this  account  is  charged. 


V-.. 


2D 


Cost  Accounting 


L-7.    Proprietor's  Capital  Account. 

The  credit  balance  in  this  account  represents  the  entire  investment  ot  the 
proprietor,  or  in  the  case  of  a  partnership,  of  the  several  proprietors.  If  the 
business  be  a  corporation,  this  account  should  be  entitled  Capital  Stock.  In 
the  case  of  a  partnership  any  surplus  earnings  left  in  the  business  are  credited 
to  this  account,  but  in  the  case  of  a  corporation  the  earnings  should  be  credited 
to  Surplus  and  not  to  Capital  Stock. 

Iy-8.     Accrued   Salaries. 

The  fuel  dealers  of  Seattle  have  voluntarily  obligated  themselves  to  see 
that  their  prices  on  coal  and  wood  shall  be  made  in  the  same  way  and  with 
the  same  margins  as  when  they  were  under  the  direction  of  the  United  States 
Fuel  Administrator.  This  means  that  to  the  cost  of  one  ton  of  coal  there  shall 
be  added  30  cents  as  the  margin  of  profit,  and  this  total  fixes  the  retail  delivered 
price  of  a  single  ton  shoveled  off  in  the  basic  zone,  exclusive  of  the  packing 
charge.  A  load  of  wood  is  priced  in  the  same  way.  It  was  the  rule  of  the 
United  States  Fuel  Administrator  that  the  dealers  were  entitled  to  charge  sal- 
aries in  the  expense  accounts  determining  the  cost  of  coal  and  wood,  at  the  rate 
of  50  cents  per  ton  of  coal  and  50  cents  per  one-half  cord  of  wood.  Therefore,  in 
Seattle,  account  0-14  is  charged  and  account  L-8  is  credited  with  50  cents  per 
unit  of  sales,  counting  a  ton  as  a  unit  of  coal  and  one-half  cord  as  a  unit  of  wood, 
and  for  the  sake  of  uniformity,  it  is  advisable  that  this  rate  be  used  elsewhere. 
In  the  cost  figures  used  in  this  pamphlet  for  illustrative  purposes,  it  is  assumed 
that  the  proprietor  does  all  the  work  for  which  salaries  usually  are  paid  as  dis- 
tinguished from  the  work  for  which  wages  are  paid.  In  other  words,  this  is 
the  method  used  in  determining  the  proper  amount  to  charge  into  expenses  for 
the  services  of  the  proprietor.  In  those  concerns,  however,  which  actually 
employ  men  on  a  salary  basis  who  are  not  interested  in  the  business,  if  the 
salaries  paid  amount  to  more  than  this  allowable  amount,  the  excess  should  be 
charged  into  some  account  which  does  not  enter  into  the  cost  finding  figures, 
as  for  example  account  M-7.  At  the  close  of  the  period  this  account  is  closed 
into  account  L-9. 

L-9.     Proprietor's  Drawing  Account. 

In  a  small  business  where  there  is  only  one  proprietor,  all  withdrawals 
by  him  of  cash  or  commodities  from  the  business  should  be  charged  to  this 
account,  and,  at  the  end  of  the  period,  the  balance  in  the  account  should  be 
closed  into  account  L-7.  If  there  are  two  or  more  proprietors,  this  account 
should  be  split  into  two  or  more  accounts  designated,  for  example,  John  Doe 
Drawing  Account,  Richard  Roe  Drawing  Account.  The  symbols  in  such  case 
should  be  L-9a,  L-9b,  etc.  In  the  case  of  a  corporation  this  account  should 
not  be  used.  Any  stock-holder  who  serves  the  corporation  should  be  paid  a 
stipulated  salar\'  like  any  employee  and  his  withdrawals  should  be  charged, 
either  to  L-8,  or  to  his  personal  account,  as  preferred. 

NOMINAL  ACCOUNTS. 
Gross  Margin  Accounts.     (Symbol  G) 

G-1.     Coal    Sales   Delivered. 

It  will  be  seen  by  reference  to  the  explanation  of  the  Sales  Sheet  shown  in 
Form  E  that  there  are  four  Sales  Sheets  in  use  at  once.  The  first  is  for  record- 
ing the  sales  of  both  coal  and  wood  delivered  by  teams,  the  second  for  deliver- 


> 


4 


\ 


For  Retail  Fuel  Dealers 


21 


ies  by  truck,  the  third  for  deliveries  by  hired  equipment,  and  the  fourth  for 
sales  made  at  yard.  The  first  three  constitute  the  delivered  sales.  Some  sales 
are  made  for  cash  and  some  are  charged  to  the  buyer's  account,  and  proper 
money  columns  are  provided  on  the  Sales  Sheets  to  care  for  these  two  kinds  of 
sales.  The  totals  of  the  cash  sales  of  each  Sales  Sheet  are  entered  in  the  Cash 
Book  to  the  credit  of  Coal  Sales  Delivered,  G-1,  or  Coal  Sales  at  Yard,  G-5, 
or  Wood  Sales  Delivered,  G-10,  or  Wood  Sales  at  Yard,  G-1 5,  as  the  case 
may  be.  The  totals  of  the  charge  sales  are  posted  directly  to  the  ledger  ac- 
count of  Coal  Sales  Delivered,  G-1,  Coal  Sales  at  Yard,  G-5>  Wood  Sales  De- 
livered, G-10,  or  Wood  vSales  at  Yard,  G-1 5,  as  the  case  may  be.  The  result 
will  be  that  account  G-1  will  be  a  credit  account  which  will  accumulate  the 
amount  of  all  coal  sold  delivered,  either  for  cash  or  on  account,  regardless  of 
whether  it  is  delivered  by  team,  by  trucks,  or  by  hired  equipment.  It  may  be 
added  that  should  the  dealer  desire  to  keep  record  of  the  deliveries  made  by 
each  individual  truck  or  team  additional  Sales  Sheets  can  be  used  for  that  pur- 
pose. 

G-2.     Packing  Coal  and  Lineback. 

In  an  ordinary  sense  this  is  an  expense  account  and  should  be  placed  in 
some  group  of  expenses,  but  in  Seattle  the  work  of  packing  coal  and  lining 
back  is  a  contract  arrangement  with  the  Packers'  Union  in  which  the  packer 
gets  the  entire  fee.  Nothing  can  be  gained  in  a  cost  finding  system  by  illustrat- 
ing the  method  of  finding  the  cost  of  packing-in  a  ton  of  coal  when  one 
knows  the  cost  in  the  beginning.  The  chief  reason  for  placing  this  account 
in  this  position  is  to  insure  that  it  will  be  deducted  from  the  amount 
of  coal  sales  delivered  and  thus  eliminate  from  such  sales  the  amount  added 
thereto  for  packing.  The  deduction  leaves  account  G-1  simplified  as  though  all 
such  sales  were  made  by  shoveling  directly  from  the  wagon  into  the  customer's 
bin  and  this  especially  is  desirable  in  as  much  as  we  are  chiefly  concerned  in 
finding  the  gross  margin  on  a  ton  of  coal.  The  problem  should  not  be  complicated 
by  showing  the  cost  of  the  packing  in  some  cases  and  the  cost  without  packing 
in  others.  Therefore,  in  the  cost  finding  calculations  made  under  the  system 
outlined  herein,  account  G-2  is  alwavs  treated  as  a  deduction  from  account 
G-1. 

G-3.     Sales  Allowances  on  Coal. 

In  all  buying  and  selling  transactions,  it  not  infrequently  happens  that 
some  allowance  must  be  made  to  the  buyer  in  order  to  settle  some  disagree- 
ment which  was  not  in  contemplation  when  the  sale  was  made.  Such  allow- 
ances on  sales  of  coal  delivered  should  be  charged  to  this  account  and  credited 
to  the  personal  account  of  the  buyer  if  it  was  a  charge  sale,  or  to  cash,  if  it  was 
a  cash  sale.  This  account,  like  account  G-2,  is  always  a  deduction  from  account 
G-1,  it  being  assumed  that  there  are  no  sales  allowances  on  sales  at  yard. 

G-4.    Cost  of  Coal  Sold  Delivered. 

Cost,  in  this  case,  is  not  operating  cost  but  prime  cost,  and  prime  cost  means 
the  cost  of  coal  in  carload  lots  delivered  on  dealers'  side  track,  if  the  coal  comes 
by  rail,  or  alongside  the  dealers'  dock  if  the  coal  comes  by  water.  This  means 
cost  at  the  mine  plus  all  transportation  charges.  The  term  gross  margin  means 
the  difference  between  the  prime  cost  and  the  selling  price.  Hence,  the  gross 
margin  is  made  up  of  the  operating  cost  plus  the  margin  of  profit.  The  average 
selling  price  is  determined  easily  by  dividing  the  total  in  account  G-1,  after  de- 
ducting accounts  G-2  and  G-3,  by  the  number  of  tons  sold  delivered.    The  debit 


22 


Cost  Accounting 


balance  in  this  account,  G-4,  divided  by  the  number  of  tons  sold  deUvered  will 
give  the  average  prime  cost,  and  the  average  prime  cost  deducted  from  the  av- 
erage selling  price  will  give  the  average  gross  margin.  In  the  description  of 
Form  E  two  methods  are  given  for  finding  the  cost  of  coal  sold  delivered  as  dis- 
tinguished from  the  cost  of  coal  sold  at  yard  and  cost  of  coal  sold  in  carlots.  It 
will  be  sufficient  at  this  place  to  say  that  account  G-4  is  to  be  charged  with  the 
cost  of  coal  sold  delivered,  account  G-6  is  to  be  charged  with  the  cost  of  coal 
sold  at  yard,  account  G-8  is  to  be  charged  with  the  cost  of  coal  sold  in  carlots, 
and  the  sum  of  the  three  will  be  credited  to  Coal  Stock,  A-5. 

G-5.     Coal  Sales  at  Yard. 

This  account  is  built  up  from  the  cash  sales  and  charge  sales  of  the  Sales 
Sheets  devoted  to  sales  at  yard,  as  account  G-1  is  built  up  for  sales  delivered. 

G-6.     Cost  of  Coal  Sold  at  Yard. 

All  that  it  is  necessary  to  say  in  regard  to  the  building  up  of  this  account  is 
found  under  the  description  of  account  G-4. 

G-7  Carlot  Sales  of  Coal. 

In  the  retail  trade,  certainly  in  Seattle,  all  sales  for  profits  are  either  sales 
delivered  or  sales  at  yard,  and  the  coal  sold  in  carlots  is  usually  an  accommo- 
dation matter  of  one  dealer  ordering  carlots  for  a  neighboring  dealer.  This  ac- 
count is  created  therefore  for  the  purpose  of  keeping  the  amount  received  from 
such  sales  and  the  tonnage  thereof  separate  from  the  sales  delivered  and  the 
sales  at  yard.  If  this  separation  is  not  made  the  amounts  received  and  the  ton- 
nage of  carlot  sales  wdll  disturb  the  cost  finding  of  the  profit  making  sales. 
Carlot  purchases  for  other  dealers  must  be  entered  on  the  Carlot  Purchase  Reg- 
ister just  as  other  carlot  purchases  are  entered.  These  carlot  sales  of  coal  must 
be  kept  separate  from  other  sales  and  recapitulated  in  the  proper  columns  on  the 
sheet  Recapitulation  of  Deliveries  and  Charges  from  Sales  Sheets  and  of  Carlot 
Sales,  as  shown  in  Form  F.  Whether  these  carlot  sales  to  neighboring  dealers 
are  charged  at  the  cost  price,  or  at  a  price  which  includes  a  profit,  the  buyer 
is  to  be  charged,  and  this  account  is  to  be  credited  with  the  amount  at  the  sell- 
ing price. 

G-8.     Cost  of  Coal  Sold  in  Carlots. 

See  the  description  of  account  Gr-4.  The  purchase  price  of  this  coal  is  to 
be  charged  to  this  account  and  credited  to  Coal  Stock,  A-5. 

G-9.     Excess  Cost  of  Coal  Bought  from  Other  Retailers. 

All  carlot  purchases  are  entered  on  the  Carlot  Purchase  Register  as  illus- 
trated on  Form  A  and  all  purchases  from  other  retailers  are  entered  on  Reg- 
ister of  Purchases  from  other  Retailers  as  shown  on  Form  B.  At  the  end  of 
each  month  both  of  these  Purchase  Registers  are  recapitulated  and  the  recapitula- 
tion transferred  to  the  record  books  described  in  the  explanations  of  Forms  C.  and 
D.  The  cost  from  the  Carlot  Register  means  the  sum  of  the  invoice  amount  and  the 
freight.  At  the  end  of  the  fiscal  period,  the  totals  on  Forms  C  and  D  will 
show  the  total  number  of  units  purchased  and  the  total  cost  of  the  same  for 
each  kind  of  coal  and  each  kind  of  wood.  The  recapitulation  of  carlot  pur- 
chases, shown  on  Form  C,  will  give  the  true  average  prime  cost  of  each  kind 
of  coal  or  wood  by  dividing  the  total  cost  of  each  by  the  number  of  units  of 
each.  The  totals  in  Form  D,  being  purchases  from  other  retailers,  show  the 
total  amount  paid  for  each  kind  of  material,  but  this  total  includes  an  excess 
cost  above  what  the  material  would  have  cost  had  it  been  bought  in  carlots. 


4 


\ 


For  RetaiIv  Fuel  Deai^ers 


23 


Knowing  the  quantity  bought  from  other  retailers  and  knowing  from  Form 
C  the  prime  cost,  it  is  easy  to  compute  what  the  total  amount  of  each  kind  of 
material  bought  from  other  retailers  would  have  cost  had  it  been  bought  in 
carlots.  Deducting  this  amount  from  the  actual  amount  paid  other  retailers, 
the  remainder  will  show  the  excess  cost  of  each  kind  of  material,  and  the  sum 
of  these  excesses  gives  the  amount  which  should  be  charged  to  account  G-9 
and  credited  to  account  A-5.  In  like  manner,  the  excess  cost  of  w^ood  bought 
from  other  retailers  is  found. 

G-10.     Wood  Sales  Delivered. 
This  account  is  treated  for  w^ood  as  account  G-1  is  treated  for  coal. 

G-11.     Sawing  Wood  Sold  Delivered. 

If  all,  or  most  of,  the  fuel  dealers  owned  and  operated  their  own  wood- 
saws,  it  would  be  proper  to  place  this  account  in  one  of  the  expense  groups. 
However,  it  appears  that  the  great  majority  of  dealers  hire  their  wood  sawed, 
and,  in  this  case,  the  cost  of  sawing  wood  is  analagous  to  the  cost  of  packing 
coal  for  it  is  a  contract  arrangement  that  can  best  be  handled  as  packing  coal 
is  handled,  that  is,  by  eliminating  it  from  the  sales. 

At  the  time  wood  is  sawed  it  is  obvious  that  it  cannot  be  determined  what 
part  will  be  delivered  and  what  part  sold  at  yard.  Therefore,  the  total  amount 
for  sawing  wood  throughout  the  year,  or  other  cost  finding  period,  is  charged 
to  this  account  and  no  charge  during  the  period  is  made  against  G-16.  At  the 
end  of  the  year,  or  other  cost  finding  period,  when  the  inventory  is  taken,  a 
correcting  entry  should  be  made  charging  account  A-14  with  the  cost  of  sawing 
all  the  sawn  wood  on  hand,  and  this  amount  should  be  credited  to  account 
G-11  so  as  to  insure  that  the  debit  balance  in  G-11  represents  the  cost  of  sawing 
only  the  wood  removed  from  yard.  In  this  case,  it  must  be  remembered  in 
taking  the  wood  inventory  that  no  added  value  is  to  be  shown  for  the  saw- 
ing cost  of  the  sawn  wood  on  hand  since  this  increased  value  will  show  among 
the  assets  in  account  A-14.  The  "debit  balance  in  account  G-11  must  now  be 
divided  by  crediting  account  G-11  and  charging  account  G-16  with  that  pro- 
portion which  the  wood  sold  at  yard  bears  to  the  wood  sold  delivered  (ex- 
pressed in  cords)  as  ascertained  from  Form  F. 

G-1 2.     Packing  Wood  and  Stacking. 
This  account  is  to  be  handled  for  wood  as  account  G-2  is  handled  for 

G-1 3.     Sales  Allowances  on  Wood. 
This  account  should  be  handled  for  wood  as  account  G-3  is  handled  for 

G-14.    Cost  of  Wood  Sold  Delivered. 

This  account  should  be  handled  for  wood  as  account  G-4  is  handled  for 
coal. 

G-1 5.    Wood  Sales  at  Yard. 

This  account  is  built  up  from  the  cash  sales  and  charge  sales  of  the 
Sales  Sheets  devoted  to  sales  at  yard  as  account  G-10  is  built  up  for  sales  de- 
livered. 

G-16.     Sawing  Wood  Sold  at  Yard. 

This  account  is  explained  in  account  G-11. 


coal. 


coal. 


24 


Cost  Accounting 


G-17.    Cost  of  Wood  Sold  at  Yard. 


This  account  is  built  up  for  wood  as  account  G-6  is  built  up  for  coal,  both 
of  which  are  explained  in  the  description  of  G-4. 

G-18.     Carlot   Sales  of  Wood. 
This  account  is  built  up  for  wood  as  account  G-7  is  built  up  for  coal. 

G-19.     Cost  of  Wood  Sold  in  Carlots. 
This  account  is  built  up  for  wood  as  account  G-8  is  built  up  for  coal. 

G-20.    Excess  Cost  of  Wood  Bought  from  Other  Retailers. 
This  account  is  built  up  for  wood  as  account  G-9  is  built  up  for  coal. 

Shrinkage  Accounts,  (Symbol  S). 

S-1.     Degradation  and  Loss  on  Coal. 

Degradation  means  the  depreciation  in  the  value  of  coal  due  to  break- 
age, smaller  sizes  usually  being  less  valuable  than  the  larger.  Loss  means  the 
physical  loss  in  weight  which  comes  from  either  evaporation  of  the  moisture  and 
the  volatile  matter,  or  from  pilfering,  etc.  The  method  of  finding  the  degra- 
dation and  loss  is  explained  in  the  description  of  Form  E. 

S-2.     Shrinkage  and  Loss  on  Wood. 

There  is  little,  if  any,  degradation  in  wood  as  there  is  in  coal.  Wood 
-does  not  break  as  coal  does.  If  fire  wood  were  kept  a  long  term  of  years 
there  would  be  a  degradation,  but  practically  all  is  sold  within  twelve  months 
after  it  was  in  the  tree  so  that  the  degradation  is  negligible.  The  word  "shrink- 
age" is  used  to  describe  that  quantity  of  wood  put  on  the  v/agon  in  excess  of 
the  theoretical  amount  sold  as  entered  on  the  books.  As  is  well  known,  the 
laws  governing  the  measurement  of  fire-wood  are  very  indefinite  and  unsatis- 
factory, and  the  dealers  seek  to  protect  themselves  by  delivering  more  wood 
than  they  bargained  to  sell.  For  example,  the  average  load  of  forest  wood  sold 
in  Seattle  contains  something  like  14%  more  wood  than  comes  from  one-half 
cord.  The  fear  of  legal  difiiculties  leads  the  dealers  to  sell  this  quantity  and 
bill  it  as  three-eights  of  a  cord  and  usually  record  the  sale  on  their  statistical 
books  as  one-half  cord.  In  other  words,  the  dealers  commonly  give  more 
wood  than  the  records  show  they  sell,  and  the  word  "shrinkage"  used  in  this 
account  is  intended  to  refer  to  this  over-load  or  excess  amount  actually  de- 
livered above  what  the  records  show.  The  method  of  finding  the  shrinkage; 
loss  is  explained  in  the  description  of  Form  E.  , 

Uni^oading  Accounts  (Symbol  U) 
TJ-L     Labor  Unloading  Coal. 

This  account  is  charged  with  all  payments  or  earnings  for  manual  labor 
unloading  coal.  The  source  of  these  charges  is  explained  in  the  description  of 
the  Time  Book,  Form  G. 

U-2.    Team  Unloading  Coal. 

It  may  become  necessary,  at  times,  to  unload  coal  from  cars  into  wagons 
or  trucks  in  order  to  haul  it  some  little  distance  to  the  storage  pile.  This  ac- 
count is  designed  not  only  to  keep  track  of  the  cost  of  doing  such  work,  but  to 


For  Retail  Fuel  Dealers 


25 


# 


become  one  of  a  group  of  keys  to  the  distribution  of  certain  undistributed 
accounts.  It  is  necessary,  of  course,  to  get  all  of  the  cost  of  unloading  coal  into 
the  unloading  group,  just  as  it  is  necessar}^  to  prevent  the  cost  of  such  work 
from  improperly  finding  its  way  into  some  other  group.  Also  it  is  necessary 
to  have  some  guide  for  the  distribution  of  accounts  carrying  such  items  as  feed, 
shoeing,  veterinary,  repairs  on  harness  and  wagons,  taxes  and  depreciation  on 
teams,  etc.,  since  these  accounts  cannot  conveniently  be  distributed  among  the 
departments  until  the  end  of  the  fiscal  period.  There  are  corresponding  ex- 
penses connected  with  the  operation  of  trucks.  Until  the  time  spent  by  such 
equipment  in  each  department  is  known  such  expenses  cannot  be  distributed. 

Teams  and  trucks  may  work  in  unloading  coal,  unloading  wood,  delivering 
coal,  delivering  wood,  and  may  perform  various  tasks  from  which  the  earnings 
go  to  the  credit  of  Outside  1  eaming  and  Trucking,  M-6.  The  time  of  the  team  or 
truck  IS  indicated  by  the  time  of  the  driver,  or  chauffeur;  and  the  time  of  the  driver 
and  chauffeur  is  indicated  by  the  balances  in  accounts  U-2,  U-3,  U-5,  U-6,  D-1, 
D-2,  D-3,  p-4,  and  (except  as  noted  below)  M-6.  Dividing  the  balance  in  each 
of  these  nme  accounts  by  the  sum  of  the  nine  balances  gives  the  proportion  or 
key,  for  dividmg  the  undistributed  accounts,  as  is  illustrated  in  Exhibits  D  and  E. 

The  use  of  the  nine  balances  to  determine  the  distribution  presupposes  that  the 
accounts  have  no  credits  and  that  the  debits  are  made  up  entirely  of  the  wages  paid 
the  drivers  and  chauflFeurs.  If  this  is  not  true,  an  allowance  must  be  made  by  setting 
aside  and  ignoring  all  the  credits  and  all  the  debits  except  the  wages  earned 
Wages  being  equivalent  to  time  spent  working,  the  proportion  of  wages  in  each 
account  is  the  equivalent  of  the  time  the  equipment  spends  in  each  department. 
Outside  Teaming  and  Trucking,  M-6,  being  a  revenue  account  which  receives 
credit  for  the  full  amount  charged  for  the  use  of  teams  and  trucks  when  work- 
ing out  for  hire  and  receiving  these  credits  immediately  after  such  work  is  done 
is  certain  to  need  adjustment  before  its  balance  can  be  used  as  a  distribution 
uTu'  ^*^^^  ^'^^^  accounts  should  be  kept  free  from  all  credits  and  from 

all  debits  except  wages,  (ignoring  correcting  entries)  so  that  their  balances  may 
be  correct  divisors.  At  the  end  of  the  fiscal  period,  after  determining  the  pro- 
portion of  time  spent  by  each  class  of  equipment  in  each  of  the  departments. 
It  will  simplify  the  statement  of  Allocation  of  Expenses,  as  shown  in  Exhibit 
L,  If  U-2,  U-3  U-5,  U-6  and  M-6  be  charged  with  their  proportions  and  the 
various  undistributed  expenses  credited,  leaving  undistributed  the  expenses  con- 
nected with  deliveries.  The  time  spent  by  the  teams  and  trucks  unloading  coal 
and  wood  and  working  for  others  is  practically  negligible,  while  the  time  spent 
delivering  IS  the  significant  item.  By  disposing  of  the  negligible  part,  the  re- 
mainder of  each  undistributed  account  will  be  shown  on  the  statement  and  the 
statement  will  be  more  explanatory  than  would  be  the  case  if  all  these  expenses 
were  distributed  and  wiped  out. 

U-3.     Truck  Unloading  Coal. 

This  account  is  to  be  handled  for  work  done  by  the  trucks  in  unloading 
coal  as  account  U-2  is  handled  when  the  teams  unload  coal. 

U-4.     Labor  Unloading  Wood. 
This  account  is  to  be  handled  for  wood  as  account  U-1  is  handled  for  coal. 

U-5.     Team  Unloading  Wood. 
This  account  is  to  be  handled  for  wood  as  account  U-2  is  handled  for  coal 


26  Cost  Accounting 

U-6.     Truck  Unloading  Wood. 
This  account  is  to  be  handled  for  wood  as  account  U  3  is  handled  for  coal. 

Delivery  Accounts  (Symbol  D) 

D-1.     Labor  Delivering  Coal  by  Teams. 

In  explaining  the  Daily  Time  Ticket,  Form  H,  it  is  shown  that  the  work- 
man separates  his  time  into  the  different  departments  or  kinds  of  work  he  does 
during  the  day.  All  the  labor  performed  in  delivering  coal  by  teams  is  en- 
tered in  column  G  of  the  Time  Book,  and,  at  the  end  of  the  month,  account  D-1 
is  charged  with  all  that  was  earned  by  all  of  the  men  who  worked  in  Depart- 
ment G.  The  result  is  that,  at  the  end  of  the  cost  finding  period,  this  account 
will  show  the  total  for  the  fiscal  period  paid  for  man  labor  in  delivering  coal 

by  team. 

D-2.     Labor  Delivering  Wood  by  Teams. 

This  account  is  built  up  for  wood  the  same  as  account  D-1  is  built  up  for 

coal. 

D-3.     Labor  Delivering  Coal  by  Trucks. 

This  account  is  built  up  for  trucks  the  same  as  account  D-2  is  built  up 

for  teams. 

D-4.     Labor  Delivering  Wood  by  Trucks. 

This  account  is  built  up  for  trucks  the  same  as  account  D-2  is  built  up 

for  teams. 

D-5.     Coal  Delivered  by  Hired  Equipment. 

It  is  considered  good  practice  for  the  dealer  to  own  and  operate  delivery 
equipment  sufficient  only  for  handling  the  average  tonnage;  and,  at  busy  per- 
iods, to  hire  teams  or  trucks  to  help  during  the  peak  times,  rather  than  to 
keep  equipment  to  handle  the  peak  loads,  and  thus  have  some  costly  equipment 
lying  idle  much  of  the  year.  This  account  is  charged  therefore  with  all  pay- 
ments, or  amounts  earned,  for  delivering  coal  by  hired  equipment.  Provision 
is  made,  as  shown  in  Form  F,  for  recording  the  quantity  delivered  by  hired 
equipment.  At  the  end  of  the  cost  finding  period,  the  quantity  so  delivered  di- 
vided into  the  cost  of  the  same  will  give  the  average  cost  of  delivering  coal  by 
hired  equipment.  The  chief  purpose  of  this  account  is  to  keep  such  cost  separate 
from  the  cost  of  delivering  by  teams  or  trucks  owned  by  the  dealer.  By  sep- 
arating the  quantities  delivered  by  teams,  trucks  and  hired  equipment,  and 
knowing  the  total  cost  of  each,  it'  becomes  a  simple  matter  to  determine  the 
average  cost  per  unit  of  each  and  also  the  average  cost  of  all. 

D-6.    Wood  Delivered  by  Hired  Equipment. 
This  account  is  built  up  for  wood  as  account  D-5  is  built  up  for  coal. 

D-7.     Electric  Wagon  Loader  Expense. 

This  account  is  to  bc/  used  only  in  those  yards  operating  an  electric  wagon 
loader.  It  is  entered  here  for  illustrative  purpose  and  obviously  not  to  create 
the  idea  that  it  should  be  used  in  yards  not  having  such  equipment.  This  ac- 
count is  self-explanatory  and  is  charged  with  the  cost  of  current  repairs  and 
all  expenses  in  connection  therewith  except  depreciation  which  should  be 
charged  into  account  D-8. 


For  Retail  Fuel  Dealers 


27 


* 


■* 


D-8.     Depreciation  on  Wagon  Loader. 

For  cost  finding  purposes,  depreciation,  being  an  expense  item,  might 
properly  be  charged  into  some  expense  account,  for  example  D-7,  but  as  the 
Income  Tax  Return  requires  a  separate  statement  for  all  depreciation  charged 
for  the  year,  it  is  believed  best  to  keep  all  depreciation  items  in  separate  ac- 
counts, as  shown  in  Exhibit  B.  Exhibit  B  will  show  the  determination  of  the 
amount  to  charge  into  this  account  and  that  the  total  of  the  various  depreciation 
charges  is  to  be  credited  to  Reserve  for  Depreciation,  A-20. 

D-9.     Feed,  Shoeing  and  Barn  Expense. 

This  account  is  to  be  charged  with  the  cost  of  all  feed,  horse-shoeing, 
veterinary  and  other  expenses  connected  with  the  maintenance  of  teams, 
wagons  and  harness  which  do  not  belong  in  accounts  D-10,  D-11,  D-12  and 
D-13.  Labor  working  in  the  barn  caring  for  the  horses  and  cleaning  the  barn 
should  be  reported  on  the  Daily  Time  Ticket  as  Labor  Caring  for  Teams,  and 
when  the  pay  roll  is  distributed  such  labor  should  be  charged  to  this  account, 
D-9,  and  not  to  accounts  D-1  or  D-2.  The  reason  for  this  is  that  although 
such  labor  is  probably  a  delivery  charge,  being  connected  with  the  teams  and 
the  teams  being  used  chiefly  for  delivery,  it  must  be  divided  between  deliver- 
ing coal  and  wood  (accounts  D-1  and  D-2)  and  accounts  U-2,  U-5  and  M-6  in  the 
true  proportion,  and  this  proportion  can  best  be  determined  in  the  office  at  the 
end  of  the  cost  finding  period  rather  than  by  permitting  the  workman  himself  to 
undertake  the  division  each  day.  The  driver,  spending  an-  hour  in  the  bam,  may 
know  that  he  spent  an  hour,  but  he  ought  not  to  be  required  to  proportion  that  hour 
between  accounts  U-2,  U-5,  D-1,  D-2  and  M-6.  At  inventory  time,  the  amount 
of  feed  and  team  supplies  on  hand  is  credited  in  red  ink  to  this  account  D-9, 
and,  after  the  closing  entries  are  made,  the  amount  of  the  inventory  is  brought 
down  as  a  new  debit  balance.  But  as  explained  in  description  of  account  A-9, 
this  debit  balance  is  shown  on  the  financial  statement  under  Operating  Sup- 
plies, A-9,  as  an  asset  and  not  in  D-9  among  the  delivery  expenses,  since  it  is 
an  unconsumed  expense. 

D-10.     Repairs  on  Wagons  and  Harness. 

This  account  is  so  self-explanatory  that  it  is  hardly  necessary  to  say  that 
all  repairs  on  wagons  and  harness  should  be  charged  to  it.  The  reason  for  keep- 
ing it  as  an  expense  account  by  itself  is  that  the  Income  Tax  Return  requires 
a  separate  statement  for  repairs  and,  like  depreciation,  there  is  no  use  in  losing 
an  item  in  some  expense  account  when  it  is  known  that  it  will  have  to  be  separated 
ultimately  and  shown  as  an  individual  item. 

D-11.    Miscellaneous  Team  Expense. 

This  account  is  sufficiently  self-explanator>  if  we  add  that  it  should  be 
charged  with  any  expense  connected  w^ith  the  teams,  wagons  or  harness  which 
cannot  properly  be  charged  into  accounts  D-9,  D-10,  D-12  and  D-13. 

D-12.     Taxes   on  Teams,   Wagons,   Harness   and   Team   Supplies. 

For  cost  finding  uses  alone,  it  w^ould  eliminate  a  ledger  account  to  charge 
such  taxes  into  account  D-11,  but  as  the  Income  Tax  Return  requires  a  separ- 
ate statement  for  taxes,  it  is  believed  best  to  keep  such  items  separate  rather 
than  lose  them  in  a  general  account. 


28 


Cost  Accounting 


D-13.     Depreciation  on  Teams,  Wagons  and  Harness. 

The  method  for  finding  depreciation  is  shown  in  Exhibit  B.  This  item 
of  expense  for  cost  finding  purposes  alone  could  very  properly  be  charged  into 
account  D-U  were  it  not  that  the  Income  Tax  Return  requires  a  separate 
statement. 

D-14.     Gasoline,   Oil,  Tires  and  Truck   Supplies. 

This  account  is  to  be  charged  with  all  such  supplies  bought  through  the 
period.  At  inventory  time,  the  amount  of  such  supplies  on  hand  is  to  be  credited 
in  red  ink  to  this  account,  and,  after  the  closing  entries  are  made,  the  amount 
of  the  inventory  is  to  be  brought  down  as  a  new  debit  balance.  This  inventory 
balance,  while  remaining  in  this  account,  is  shown  on  the  financial  statement. 
Exhibit  I,  under  account  xA-9  for  the  reason  given  in  explanation  of  account 
D-9.  This  account  may  further  be  divided  if  the  dealer  so  desires:  for  ex- 
ample,  some  dealers  may  want  to  know  the  exact  amount  paid  for  tires  or 

gasoline. 

D-15.    Repairs  on  Trucks. 

This  account  is  to  be  charged  with  all  repair  items  incurred  on  trucks 
during  the  period,  and,  as  explained  under  account  D-10,  a  separate  account 
is  kept  partly  for  Income  Tax  purposes  and  partly  because  it  is  wise  to  know 
the  cost  of  repairing  trucks. 

D-16.     Miscellaneous  Truck  Expense. 

There  are  expense  items  such  as  license  fees  and  liability  insurance  on 
trucks  which  must  be  charged  among  delivery  accounts  and  yet  which  cannot 
properly  be  charged  into  accounts  D-14,  D-IS,  D-17  and  D-18.  Such  items 
should  be  charged  to  this  account. 

D-17.     Taxes  on  Trucks  and  Truck  Supplies. 
This  account  is  handled  for  trucks  as  D-12  is  handled  for  teams. 

D-18.     Depreciation  on  Trucks. 
This  account  is  handled  for  trucks  as  account  D-13  is  handled  for  teams. 

D-19.     Miscellaneous  Delivery  Expense. 

Items  of  expense  connected  with  delivery  are  incurred  which  properly  can- 
not be  charged  directly  to  any  other  of  the  delivery  expense  group,  and  yet 
belong  in  the  generaj  delivery  group.     This  account  is  designed  to  hold  such 

expenses. 

D-20.     Depreciation   on   Small   Tools. 

Exhibit  B  shows  the  method  of  determining  depreciation  and  making 
the  book  entries,  and  assuming  that  substantially  all  of  the  small  tools  used 
around  a  fuel  yard  are  used  in  the  delivery  department,  the  depreciation  on 
small  tools  is  placed  in  the  general  delivery  group  and  it  is  kept  separate  for 
Income  Tax  purposes. 

Yard  Accounts  (Symbol  Y) 

Y-1.     Labor  in  Yard. 

Labor  in  and  about  the  yard  connected  with  the  handling  of  coal  and 
wood,  or  other  material  for  sale,  which  is  not  an  unloading  or  delivery  task 


4 


^ 


For  Retaii,  Euel  Dealers 


29 


should  be  charged  to  this  account;  but  labor  repairing  buildings  or  pavement 
about  the  yard  should  be  charged  to  account  M-3.  Labor  in  yard,  like  unload- 
ing expenses  and  delivery  expenses,  as  well  as  overhead  expenses,  enters  into 
the  cost  of  operation.  But  where  rent  is  paid  for  the  use  of  property  and  the 
landlord  pays  the  cost  of  keeping  it  in  repair,  it  is  obvious  that  the  landlord's 
expenses  never  occur  among  the  expenses  of  the  dealer.  In  like  manner, 
when  for  cost  finding  purposes  the  dealer  charges  account  O-l  with  rent  on 
property  which  he  himself  owns,  so  as  to  get  the  rent  charge  among  his  ex- 
penses and  thus  puts  himself  on  an  equality  with  his  neighbor  who  rents  from  an 
outsider,  he  must  not  inflate  his  expenses  by  charging  repairs,  depreciation,  or 
taxes  on  real  estate  for  which  he  is  receiving  rent,  into  the  expense  groups 
which  enter  into  his  costs  of  operation.  Such  charges  must  be  entered  among 
the  Miscellaneous  Accounts,  symbol  M,  which  is  an  outside  group  and  not 
connected  with  operating  costs. 

Y-2.     Demurrage. 

One  might  assume  that  demurrage  charges  on  coal  should  be  charged  to 
some  expense  account  in  the  coal  group  and  demurrage  charges  on  wood  to  some 
corresponding  account  in  the  wood  group,  but  this  is  hardly  fair.  If  a  car  of  coal 
and  a  car  of  wood  are  in  the  yard  at  the  same  time  it  is  not  fair  because  the  coal 
was  unloaded  first  and  the  w^ood  last  to  charge  w-ood  because  the  wood  happened 
to  be  last.  It  is  believed  to  be  correct  to  apportion  demurrage  charges,  even  if 
such  charges  be  inconsiderable,  between  coal  and  wood  in  the  proportion  that  the 
units  of  each,  run  through  the  yard,  bear  to  each  other. 

Y-3.     Miscellaneous  Yard  Expense. 

This  account  is  designed  to  hold  proper  charges  of  expenses  incurred  in 
the  yard  other  than  labor. 

Overhead  Accounts  (Symbol  O) 

O-l.    Rent. 

Rent  in  this  case  means  rent  of  land  and  buildings  or  some  other  real 
estate  such  as  a  private  spur  track.  The  rental  on  such  equipment  as  teams  or 
trucks  should  be  charged  into  some  delivery  expense  such  as  Miscellaneous 
Team  Expense  or  Miscellaneous  Truck  Expense  and  not  to  the  overhead  ac- 
count of  Rent,  nor  should  the  hiring  of  such  delivery  equipment  be  charged 
to  accounts  D-5  or  D-6,  for  these  accounts  are  intended  to  hold  charges  where 
the  dealer  hires  a  team  and  driver,  or  a  truck  and  chauffeur,  by  the  ton,  cord, 
load,  day  or  hour.  When  a  dealer  rents  a  piece  of  land  equipped  with  the 
necessary  buildings  and  side  track  to  operate  a  fuel  yard  whatever  rental  he 
pays  should  be  charged  to  this  account.  If  the  rent  be  prepaid,  however,  the 
charge  in  such  case  should  be  to  A-11  and  not  to  O-l.  If  some  neighboring 
dealer  owns  his  land,  buildings  and  track,  it  could  not  be  termed  uniform  ac- 
counting to  have  one  show  a  heavy  expense  item  for  rent  and  the  other  show 
nothing  for  rent.  To  put  them  on  an  equality,  it  is  necessary  for  the  one  who 
owns  such  property  to  determine  as  nearly  as  possible  what  he  would  have 
to  pay  for  the  use  of  such  property  if  it  belonged  to  another  and  then  charge 
account  O-l  (see  explanation  of  A-11)  and  credit  account  M-2  with  such 
amount.  If  an  artificial  condition  has  been  created  whereby  the  dealer  is  both 
landlord  and  tenant,  and  since  account  O-l   is  a  tenant  account  and  account 


"•^ 


30 


Cost  Accounting 


M-2  is  a  landlord  account  the  dealer  should  be  careful  that  all  taxes,  depre- 
ciation, repairs  and  other  charges  against  the  land  and  buildings  are  excluded 
from  the  overhead  group  of  expenses  and  scrupulously  charged  into  some  of 
the  outside  expense  accounts  included  under  Symbol  M.  The  expense  of  con- 
ducting the  business  is  just  the  same  whether  the  dealer's  money  is  invested 
in  the  real  estate  or  the  dealer  pays  the  rental  to  some  other  man.  To  omit  a 
proper  charge  for  this  expense  is  to  omit  a  necessary  part  of  the  expense  of 
conducting  business. 

0-2.     Interest  Paid. 

Charge  this  account  with  all  accrued  interest  at  the  close  of  the  period 
and  all  interest  paid  during  the  period  on  obligations  connected  with  the  bus- 
iness which  do  not  represent  loans  on  real  estate.  For,  as  was  explained  under 
rent,  if  the  expense  accounts  are  charged  with  rent  on  real  estate  when  the 
dealer  owns  the  property,  it  would  be  a  double  charge  to  charge  interest  on 
real  estate  loans  on  property  for  which  rent  is  charged.  Such  interest  should 
be  charged  to  account  M-2. 

0-3.     Interest  on  Investment  Other  Than  Real  Estate. 

If  it  is  proper  to  make  a  charge  under  the  name  of  rent  (see  account  O-l) 
for  the  money  invested  in  real  estate,  it  follows  that  it  is  proper  to  make  a  charge 
for  the  remainder  of  the  investment.  Deduct  the  sum  of  the  property  on  which 
rent  is  charged  and  the  liabilities  from  the  total  assets,  and  the  remainder  will  rep- 
resent the  investment  other  than  real  estate.  Account  0-3  should  be  charged  and 
account  M-2  should  be  credited  with  the  interest  on  this  investment,  not  at  the  in- 
terest rate  on  which  short  time  loans  are  secured,  but  preferably  at  the  low  rate  of 
interest  at  which  mone\'  is  borrowed  on  good  security  for  a  long  term  of  years. 

0-4.     Salaries. 

The  reasoning  used  in  the  explanation  of  accounts  O-l  and  0-3  whereby  rent 
and  interest  should  be  charged  on  the  net  investment  applies  to  salaries.  If,  in  two 
competing  businesses,  the  manager  of  one  is  employed  by  the  owner  and  re- 
ceives a  salary  and  in  the  other  business  the  proprietor  acts  as  his  own  man- 
ager, the  cost  of  doing  business  can  be  compared  more  accurately  by  treating 
both  concerns  in  the  same  way  and  charging  salaries  account  for  the  services 
of  the  manager- owner  the  same  amount  as  though  he  were  an  employe.  The 
United  States  Fuel  Administrator  for  the  State  of  Washington  recognized  this 
principle  and  established  the  salary  rate  at  50  cents  per  ton  of  coal  and  50  cents 
per  half-cord  of  wood  on  the  sales  of  coal  and  wood  which  went  through  the  yard. 
This  salary  should  not  be  applied  to  carlot  sales  of  coal  and  wood.  Ordinarily, 
when  the  retail  dealer  sells  carlots,  he  is  merely  accommodating  some  other 
dealer  who  will  return  the  accommodation.  There  is  practically  no  expense 
connected  with  this  sale,  and,  therefore,  the  salaries  account  should  not  be 
increased  without  some  corresponding  increase  in  the  expenses.  In  cases 
where  the  retailer  engages  in  a  jobbing  business  for  profit  it  is  recommended 
that  his  wholesale  and  retail  business  be  kept  separate.  A  just  proportion  of 
the  expenses  should  be  taken  out  of  the  retail  group  and  put  into  the  wholesale 
group  (the  wholesale  department  then  being  entitled  to  whatever  profit  it  might 
make)  and  thus  not  mix  wholesale  and  retail  expenses  and  profits  to  the  con- 
fusion of  both.  This  account  is  a  debit  account,  the  corresponding  credit  ac- 
count is  L-8,  for  the  proprietor's  salar\-,  while  the  employee's  personal  account 
should  receive  credit  for  salaries  earned  by  others  than  the  proprietor. 


For  Retail  Fuel  Dealers 


31 


4' 


^ 


"^^ 


0-5.     Office  Supplies  and  Expense. 

Charge  this  account  with  all  stationery,  account  books,  stamps,  light,  water, 
fuel,  etc.  used  m  the  office.  The  inventor}-  belonging  to  this  account  should  be 
shown  on  the  financial  statement  under  A-9  as  explained  in  the  description  of 
accounts  D-9  and  D-14. 

0-6.     Trade  Associations  Expense. 

It  is  not  infrequently  the  case  that  fuel  dealers  belong  to  one  or  more 
trade  associations  which  are  helpful  to  the  business  and  the  expense  of  such 
associations  is  a  proper  charge  against  the  business. 

0-7.     Maintenance   of   Office   Automobile. 

When  an  automobile  is  used  exclusively  for  the  business,  or  if  not  used 
exclusively  where  the  expense  account  is  charged  only  with  its  true  propor- 
tion of  expense  incurred  for  the  business,  this  is  a  proper  account.  All  expenses 
connected  with  the  office  automobile  should  be  charged  to  this  account  except 
repairs,  taxes  and  depreciation,  v/hich  for  Income  Tax  purposes,  are  best  charg- 
ed into  accounts  O-IO,  O-l  1  and  0-12.  The  inventory  belonging  to  this  ac- 
count should  be  shown  on  the  financial  statement  under  A-9  as  explained  in 
accounts  D-9  and  D-14. 

0-8.     Losses   from  Bad  Debts. 

The  manager  should  determine  from  the  experience  of  previous  years 
what  percentage  of  the  accounts  receivable  is  likely  to  prove  uncollectable,  and, 
at  the  close  of  the  cost  finding  period,  this  amount  should  be  charged  to  0-8 
and  credited  to  A-4.  When  a  personal  account  proves  uncollectable,  account 
A-4  should  be  charged  and  the  personal  account  credited. 

0-9.     Miscellaneous  Overhead  Expense. 

This  account  is  designed  to  hold  any  overhead  expenses  which  cannot 
properly  be  placed  in  some  other  account  under  symbol  O. 

O-IO.     Repairs   on   Office   Furniture   and   Automobile. 
This  account  is  self-explanatory. 

O-ll.     Taxes  on  Coal,  Wood,  Office  Furniture  and  Automobile. 
This  account  is  self-explanatory. 

O-l 2.    Depreciation  on  Office  Furniture  and  Automobile. 
This  account  is  self-explanatory. 

O-l 3.     Profit  and  Loss  from  Trading. 

At  the  close  of  the  cost  finding  period,  this  account  receives  the  closing 
entries  from  all  nominal  accounts  not  included  under  symbol  M,  and  when 
completed  this  account  is  closed  into  Proprietor's  Drawing  Account,  L-9,  if  a 
partnership,  or  closed  into  Surplus  if  a  corporation. 

Miscellaneous  Accounts,  (Symbol  M)  ' 

Note:  Symbol  M  accounts  do  not  enter  into  cost  determination  and 
are  sometimes  termed  ''Outside"  accounts. 


32 


Cost  Accounting 


M-1.    Cash  Discounts. 


For  Retaii.  Fuei.  Dealers 


33 


Credit  this  account  with  any  discounts  taken  on  merchandise  purchases, 
and  at  the  end  of  the  fiscal  period  close  this  account,  as  well  as  other  symbol 
M  accounts,  into  L-9  if  a  partnership  or  into  Surplus  if  a  corporation. 

M-2.     Rentals  and  Interest  Earned. 

Under  account  O-l  it  is  explained  that  rent  is  a  proper  charge  against 
overhead  expenses  whether  the  property  rented  belongs  to  the  proprietor  of 
the  business  or  to  an  outsider:  if  to  an  outsider,  the  credit  of  rent  should  be 
to  the  personal  account  with  the  outsider;  but  if  to  the  owner  of  the  business 
account  M-2  is  the  account  to  credit.  Account  M-2  is  the  credit  account  corre- 
sponding to  account  O-l,  a  debit  account.  The  same  rules  apply  to  interest  earned 
and  this  account,  M-2,  should  receive  the  credits  from  0-3.  This  account  should 
be  charged  with  all  interest  paid  on  real  estate  mortgages. 

M-3.     Repairs  on  Buildings  and  Yard  Equipment. 

The  title  to  this  account  explains  what  items  belong  here,  and  it  is  placed 
among  the  symbol  M  accounts  for  the  reason  assigned  in  describing  Rent, 
O-l,  that  is,  when  rent  is  charged  on  property  belonging  to  the  dealer  it  is  not 
proper  to  charge  among  the  cost  accounts  repairs,  taxes,  depreciation  and  other 
expenses  which  would  be  borne  by  another  if  the  property  belonged  to  an  out- 
sider. A  separate  accoun"  is  kept  with  repairs  because  the  Income  Tax  ac- 
counting requires  a  separate  statement  of  repair  expenditures. 

M-4     .Taxes  on  Land,  Buildings  and  Yard  Equipment. 

'  This  account  is  self-explanatory  and  is  governed  by  the  principles  explained 

in  M-3. 

M-5.     Depreciation  on  Buildings  and  Yard  Equipment. 

This  account  is  self-explanatory  and  is  governed  by  the  principles  explained 

in  M-3. 

M-6.    Outside  Teaming  and  Trucking. 

It  frequently  happens  in  the  summer  and  at  other  dull  times  that  the 
dealer  can  earn  a  few  dollars  by  hauling  for  others  or  using  his  teams  in 
plowing  gardens  or  digging  basements.  It  is  economical  to  do  this  rather 
than  let  such  equipment  stand  idle.  It  is  obvious  that  whatever  amount  is 
earned  by  this  work  is  a  charge  against  the  party  for  whom  such  work  is  done, 
and  that  this  account,  M-6,  should  receive  credit  for  the  amount  earned.  At 
the  end  of  the  cost  finding  period,  this  account  should  be  carefully  charged  with 
its  just  proportion  of  the  expense  of  maintaining  the  teams  and  trucks  which 
perform  sen^ice  for  other  people.  And  monthly,  when  the  pay  roll  is  dis- 
tributed, this  account  should  be  charged  with  any  labor  performed  in  driving 
or  working  with  teams  or  trucks  used  for  others.  In-  fact,  the  distribution  of 
the  pay  roll  shown  in  this  account  is  the  key  which  determines  the  proportion 
of  the  whole  expense  for  teams  and  trucks  which  should  be  charged  to  M-6. 

M-7.     Miscellaneous  Outside  Income. 

All  the  accounts  under  symbol  M  may  be  classed  as  outside  accounts, 
that  is,  accounts  not  logically  connected  with  cost  determination.  They  constitute 
an  arbitrary  separation,  for  under  this  cost  finding  plan  only  those  nominal  ac- 
counts directly  connected  with  the  expenses  of  trading  go  into  the  cost ;  and 


■  ,^ 


0 


expenses  connected  with  other  earnings  which  by  chance  or  necessity  appear 
and  are  not  strictly  the  result  of  the  trading  operations  of  the  business  are 
kept  separate.  In  this  case  this  separation  is  grouped  under  symbol  M.  Miscel- 
laneous Outside  Income  is  intended  to  hold  such  outside  income  or  expendfture 
as  cannot  properly  be  placed  in  some  one  of  the  other  symbol  M  accounts.  At 
the  end  of  the  period,  all  of  the  accounts  under  symbol  M  should  be  closed  into 
Proprietor's  Drawing  Account,  L-9,  and  not  into  account  0-13,  for  Profit  and 
Loss  from  Trading  should  be  reserved  to  show  only  the  net  results  from  trad- 
ing. When  account  O-l 3  and  all  the  symbol  M  accounts  are  closed  into  Pro- 
prietor's Drawing  Account,  the  latter,  before  being  closed  into  Proprietor's 
Capital  Account,  L-7,  will  show  how  the  proprietor's  withdrawals  correspond 
with  the  net  earnings  from  all  sources.  In  the  case  of  a  corporation,  all  the 
symbol  M  accounts  and  the  Profit  and  Loss  from  Trading  should  be  closed  into 
Surplus. 


t' :  ^ 


EXPLANATION  OF  FORMS  FOR  AUXILIARY  BOOKS 

rOKM   A. 

Carlot  Purchase  Register. 

Form  A  is  designed  to  record  all  carlot  purchases  of  merchandise  bought 
for  sale.  A  carload  of  feed,  or  other  material,  bought  for  consumption  should  not 
be  entered  on  the  Carlot  Purchase  Register.  If  the  business  handles  other  com- 
modities than  coal  or  wood,  the  Carlot  Purchase  Register  should  be  arranged 
with  additional  columns  to  record  properly  the  extra  commodities.  The  Amount 
of  Invoice  column  (coal  and  wood  being  kept  in  separate  columns)  should  show 
the  total  amount  of  the  invoice  regardless  of  whether  the  amount  be  simply  the 
cost  of  the  material  at  originating  point  or  it  be  made  up  of  such  cost  plus  any 
freight  or  switching  prepaid  by  the  shipper  and  shown  on  the  invoice.  The 
second  group  of  colunms,  Freight  Paid  by  Us,  records,  not  necessarily  the 
freight  on  the  material,  but  the  freight  paid  by  the  dealer  himself.  In  other 
words,  transportation  charges  prepaid  by  the  shipper  should  not  be  shown  in  the 
freight  column  at  all  but  should  be  shown  either  in  the  invoice  column  if  the 
charge  appear  on  the  original  invoice,  or  it  should  be  credited  to  the  shipper  on 
the  Journal  and  charged  either  to  Coal  Stock,  A-5,  or  Wood  Stock,  A-7,  as  the 
case  may  be.  In  case  a  purchase  of  coal  or  wood  is  made  on  the  basis  of  a  delivered 
price,  (that  is,  the  shipper  is  to  bear  the  transportation  charges  and  is  to  take  credit 
for  it  on  the  invoice)  and  the  shipper  allows  the  freight  charges  to  follow  and  be 
paid  at  destination,  the  freight,  although  paid  by  the  consignee,' should  be  han- 
dled through  the  Cash  Book  by  charging  the  shipper  with  the  payment  and  it 
should  appear  neither  as  freight  on  the  Carlot  Register  nor  on  either  of  the  freight 
accounts  A-6  or  A -8  in  the  Ivedger. 

The  headings  of  the  various  columns  on  the  Carlot  Purchase  Register  are 
self-explanatory,  very  necessary,  and  should  be  filled  out  properly  for  ev- 
ery car.  The  invoice  amounts  are  to  be  posted  directly  to  the  credit  of  the 
party  from  whom  bought,  and  the  totals  are  to  be  posted  to  the  debit  of  Coal 
Stock,  A-5,  or  Wood  Stock,  A-7,  as  the  case  may  be.  But  again,  let  it  be  noted, 
the  totals  of  the  freight  columns  are  not  to  be  posted  in  as  much  as  the  two 
freight  accounts  are  built  up  entirely  from  entries  on  the  Cash  Book  or  Journal 
and  the  footings  of  the  freight  columns  on  the  Carlot  Purchase  Register  are  to 
be  used  merely  as  proof  to  check  the  correctness  of  the  ledger  account  and  to 
prevent  freight  bills  being  paid  twice.  The  Car  Record  columns  are  designed 
to  keep  the  demurrage  records.  At  the  end  of  each  month,  the  Carlot  Purchase 
Register  is  to  be  recapitulated  by  tabulating  the  quantity  and  cost  of  each  kind 
of  material  bought  in  carload  lots  and  entering  the  summary  of  each,  both 
quantity  and  cost,  in  the  summary  squares  at  the  bottom  of  Form  A ;  these 
summaries  then  being  entered  in  corresponding  columns  on  Form  C.  It  is 
important  to  note  that  cost  in  this  case  is  the  sum  of  the  invoice  and  all  freight 
regardless  of  whether  the  freight  charge  is  shown  in  the  freight  columns  or 
paid  by  the  shipper,  or  any  other  person,  and  credited  through  the  Journal.  For 
example,  suppose  there  be  in  the  month  of  January  five  cars  of  Roslyn  Mine 
Run  coal  bought.  The  proper  procedure  is  to  find  the  total  number  of  pounds 
of  this  kind  and  grade  of  coal  and  enter  it  in  the  pounds  column  of  the  proyjer 
square    on    Form    A.      Then    find    the  sum    of  the  invoices  and  the   freight 

34 


r 


' 


WJ 


I 


4 


'/ 


,#1. 


For  Retail  Fuel  Dealers 


35 


paid  and  any  freight  charged  elsewhere  for  this  kind  of  coal  and  enter  tfiis 
sum  in  the  cost  column  on  Form  A,  and  in  like  manner  for  all  the  different  kinds 
of  coal  and  wood  bought  through  the  month  so  that  the  horizontal  month  line 
on  Form  C  will  record  the  total  pounds  of  coal  and  the  total  cords  of  wood 
with  the  total  cost  of  each. 

FOR]\f   B. 

Register  of  Purchases  from  Other  Retailers. 

A  separate  record  must  be  kept  for  coal  and  wood  purchases  from  other 
retailers  and  for  the  purchases  of  these  commodities  in  carlots.  The  latter  is 
bought  at  true  prime  cost  while  the  purchases  from  other  retailers  are  bought 
at  a  higher  price  than  the  prime  cost  and  it  is  necessary  to  keep  these  records 
separate  so  that  at  the  end  of  the  cost  finding  period  the  excess  cost  paid  other 
retailers  may  be  eliminated  and  all  purchases  from  whatever  source  reduced 
to  the  true  prime  cost.  Form  B  is  self-explanatory.  At  the  end  of  the  month 
it  is  recapitulated  in  substance  as  the  Carlot  Purchase  Register  is  recapitulated, 
and  the  totals  of  Form  F  are  entered  in  the  proper  column  on  Form  D. 


FORM  c. 
Recapitulation  of  Carlot  Purchases  for  Year. 

and 


VORM    D, 

Recapitulation  of  Purchases  from  Other  Retailers  for  Year. 


As  already  explained,  these  forms  accumulate  monthly  in  separate  columns 
for  each  kind  of  coal  or  wood  (in  pounds  of  coal  and  cords  of  wood)  the  quan- 
tities and  costs  of  the  merchandise  purchases.  It  is  obvious  that  the  totals  for 
the  year  will  show  the  total  quantity  and  the  total  cost  of  each  commodity  bought 
for  sale.  The  total  quantity  reduced  to  the  normal  units,  tons  of  coal  and 
cords  of  wood,  divided  into  the  total  cost  of  each  will  give  the  average  cost  of 
each.  This  statement  gives  the  true  average  prime  cost  for  the  carlot  pur- 
chases but  not  the  prime  cost  for  purchases  from  other  retailers.  For  ex- 
ample, let  us  suppose  the  Carlot  Purchase  Register  shows  that  the  av- 
erage prime  cost  of  South  Prairie  Mixed  Steam  for  the  year  was  $6.08,  and 
that  for  the  same  period,  the  average  price  on  this  kind  and  grade  of  coal 
bought  from  other  retailers  was  $7.10  per  ton.  It  is  obvious  therefore  that  the 
excess  cost  on  South  Prairie  Mixed  Steam  bought  from  other  dealers  was 
$L02,  and  this  excess  of  $1.02  multiplied  by  the  number  of  tons  bought  from 
other  retailers  would  give  the  excess  cost  on  this  particular  kind  of  coal.  Com- 
puting the  quantity  of  each  kind  of  material  bought  from  otHer  retailers  by  the 
prime  cost  will  give  the  amount  such  material  would  have  cost  if  bought  in  car- 
lots  and  deducting  such  amount  from  the  amount  paid  other  retailers  will  give 
the  excess  paid.  A  journal  entry  should  then  5e  made  charging  Excess  Cost 
of  Coal  Bought  from  Other  Retailers,  G-9,  with  the  excess  cost  of  all  the  var- 
ious kinds  of  coal  and  crediting  this  amount  to  Coal  Stock,  A-5.  A  similar 
entry  is  then  made  charging  G-20  with  the  excess  cost  of  wood  and  crediting 
A-7  The  result  of  this,  it  is  apparent,  leaves  Coal  Stock  and  Wood  Stock  the 
same  as  though  all  coal  and  wood  had  been  bought  in  carlots.  The  statistics  ac- 
cumulated in  Forms  C  and  D  are  used  in  various  wavs  which  will  be  understood 
easilv  bv  reference  to  the  several  exhibit^'. 


'4, 


36 


Cost  AccorNTiNO 


For  Retaii.  Fuel  Dealers 


37 


»% 


roRM  E. 

Sales  Sheet. 

This  form  is  the  daily  work  sheet  constituting  the  auxiHary  Journal  or 
book  of  original  entry  for  all  sales,  except  carlot,  as  well  as  the  statistical  basis 
for  all  materials  sold  at  retail  'and  its  columns  are  self-explanatory.  Four  of 
these  sheets  are  in  use  simultaneously :  the  first  being  marked  Sold  Delivered 
by  Teams;  the  second,  Sold  Delivered  by  Trucks:  the  third,  Sold  Delivered 
by  Hired  Equipment ;  and  the  fourth.  Sold  at  Yard.  By  using  these  four  sheets 
the  four  kinds  of  sales  are  separated  \utomaticallv  ?uid  the  totals  may 
be  entered  quickly  on  Form  F,  the  coal  and  wood  being  kept  separate  on  each 
sheet.  The  eight  separations,  being  four  kinds  of  sales  of  coal  and  four  of 
wood  distributed  as  to  method  of  delivery,  are  made  with  more  ease  by  using 
four  sheets  at  once  than  if  but  one  sales  sheet  be  used  at  a  time  and  the  segre- 
gations made  from  this  one  sheet.  The  main  purpose  of  the  segregations  de- 
scribed above  is  to  facilitate  the  recapitulation  shown  on  Form  F  and  is  explain- 
ed more  in  detail  in  the  description  of  Form  F.  All  charge  sales  are  to  be 
posted  directly  from  the  Sales  Sheets  to  the  debit  of  the  purchaser.  The  totals 
of  the  charge  colimms  may  either  be  posted  directly  to  the  credit  of  the  proper 
sales  accounts  G-1,  G-5,  G-10,  or  G-15  or,  even  better,  recapitulate  the  totals 
of  all  the  charge  columns  on  Form  F,  and  then  make  one  posting  for  the  month 
of  the  total  amounts  from  the  charge  sales  columns  on  Form  F.  The  totals 
of  the  cash  sales  columns  can  best  be  disposed  of  as  soon  as  the  Sales  Sheet  is 
complete  by  making  a  Cash  Book  entry  crediting  the  proper  sales  accounts,  G-1 
G-5,  G-10,  G-15.  The  packing  columns  constitute  the  pay  roll  columns  for  the 
packers  since  the  best  place  to  keep  record  of  the  packers'  work  is  in  connec- 
tion with  the  complete  history  of  the  sale  or  delivery  which  the  packer  handles. 
If  kept  in  another  place,  either  some  kind  of  an  index  must  be  devised  or  else 
it  would  be  difficult,  if  not  impossible,  to  reproduce  data  in  case  of  dispute 
with  the  packer  unless  an  entirely  new  or  duplicate  record  be  kept,  a  method  which 
is  always  inadvisable.  The  packing  columns  on  the  Sales  Sheet  are  merely  memor- 
anda columns  and  it  is  not  considered  useful  to  keep  the  statistics  of  the  num- 
ber of  tons  packed  since  only  the  money  paid  or  earned  for  packing  is  required 
nmong  the  statistics. 

There  are  two  recapitulations  to  be  made  from  the  Sales  Sheet;  the  first 
is  the  recapitulation  shown  on  Form  F  to  which  reference  has  already  been 
made;  and  the  second  one,  now  to  be  described,  should  have  its  description 
prefaced  with  the  remark  that  this  recapitulation  may  be  made  or  not  as  th? 
dealer  mav  desire.  It  is  the  most  laborious  of  all  the  various  methods  used  in 
this  cost  finding  system  and  is  the  one  which  experience  has  shown  is  the  most 
fruitful  of  errors.  Because  of  the  labor  and  of  the  chance  for  error  involved 
in  its  calculption  a  substitute  method  much  shorter  has  been  designed  which 
will  be  described  later.  To  assist  in  the  calculation  of  the  more  complicated 
recapitidation.  now  under  discussion,  there  are  a  series  of  summary  squares  pt 
the  bottom  of  the  Sales  Sheet,  Form  F,  a  space  being  provided  in  the  top  of  each 
square  for  the  name  of  the  kind  of  coal  or  wood  and  unit  columns  being  pro- 
vided ir.  tb<»  bottom  of  each  square  for  recording  the  pounds  of  coal  or  cord^ 
of  wood.  Each  Sales  v^heet,  when  using  this  recapitulation,  should  be  worked 
over  and  th*"  total  quantity  of  each  kind  of  mateWal  sold  should  be  determined 
and  ent'^red  in  its  proper  summary  square.  This  beine  done,  another  sheet 
f^hoiild  b?  provided  which  may  b^  rmy  stock  form,  as  illustrated  in  Form  K. 
containing  a  sufficient  number  of  perpendicular  columns  with  imit  lines.     The 


various  items  in  the  summarv^  squares  of  the  Sales  Sheets  are  then  transferred 
to  the  corresponding  columns  on  Form  K,  one  horizontal  line  on  Form  K  be- 
ing used  to  record  all  the  summaries  of  one  Sales  Sheet,  this  horizontal  Ime 
being  preceded  by  the  number  of  the  Sales  Sheet.  It  is  obvious  that  the 
total  of  each  column  on  Form  K  for  the  fiscal  period  will  give  the  total  amount 
of  each  commodity  sold  during  the  period. 

The  information  furnished  by  this  recapitulation  is  mdispensable  m  build- 
ing up  the  accounts.  Degradation  and  Loss  on  Coal,  S-1,  and  Shrinkage  and 
Loss  on  Wood,  S-2.     The  dealer  knows  from  his  inventory  how  many  tons 
of  each  kind  of  coal  and  how  many  cords  of  each  kind  of  wood  he  had  at  the 
beginning  of  the  fiscal  period  and  also  knows  from  Forms  C  and  D  the  cost  and 
number  of  pounds  of  each  kind  of  coal  and  the  cost  and  number  of  cords  of 
each  kind  of  wood  he  purchased  during  the  fiscal  period.     The  sum  of  the 
inveniorv  and  the  purchases  of  each  kind  of  material  will  show  the  total  amount 
of  that  kind  of  material  to  be  accounted  for.     The  recapitulation  of  sales  on 
Form  K  plus  the  inventory  at  the  close  of  the  period  will  give  the  amount  of 
each  kind  of  material  accounted  for.     The  difference  between  the  amount  to 
account  for  and  the  amount  accounted  for  represents  the  loss  or  gain  in  quan- 
tity for  the  period  for  that  particular  kind.     Knowing  the  average  prime  cost, 
it  is  a  simple  computation  to  reduce  to  dollars  and  cents  the  loss  or  gain  on 
each  kind  of  material  handled.     The  difference  between  the  sum  of  the  losses 
and  the  sum  of  the  gains  will  represent  degradation  and  loss  on  coal  and  the 
shrinkage  and  loss  on  wood :  loss  in  these  cases  being  the  actual  physical  loss  or 
disappearance  in  quantity ;  and  degradation  being  a  decline  in  value  when  higher 
grade  lump  or  nut  coal  is  broken  up  into  fine  coal.     In  the  latter  case,  even 
though  there  is  no  loss  in  quantity,  there  is  degradation  in  value.     Degradation 
and  loss  accounts  furnish  valuable  information,  for  if  two  yards  show  differ- 
ent results  in  these  accounts,  S-1  and  S-2,  such  information  will  lead  the  deal- 
ers to  inquire  why  there  is  a  greater  loss  in  one  yard  than  in  another,  and  will 
tend  to  point  out  why  the  inferior  yard  is  destroying  good  material  when  more 
careful  work  would  prevent  such  destruction. 

We  have  said  that  this  particular  statistical  work  is  the  most  laborious  of 
all  and  the  most  liable  to  error,  and  while  it  is  better  theoretically  that 
the  dealer  follow  this  method  rather  than  the  short  one  about  to  be  described, 
yet  if  he  cannot,  or  will  not.  take  the  necessary  time  to  do  this  work,  the  short 
method  should  be  pursued,  for  it  will  answer  ever}^  purpose  except  that  degra- 
dation and  loss  accounts  cannot  be  kept  and  the  gross  margin  will  contain  the 
error  of  degradation  and  loss  (whatever  that  error  may  be)  and  another  small 
error  later  to  be  described.  The  question  is  whether  or  not  accuracy  as  to  the 
gross  margin  and  knowledge  as  to  the  degradation  and  lo§s  are  considered  of 
sufficient  importance  to  warrant  the  dealer  in  incurring  the  labor  of  the  longer 
method.  Before  the  gross  margin  can  be  found,  the  cost  of  coal  or  wood  must 
be  found,  and  this  cost  must  be  found  either  by  the  statistical  long  method  or 
by  the  short  method  of  finding  it  from  the  coal  stock  or  wood  stock  accounts. 

The  short  method  consists  in  determining  from  Coal  Stock,  A-5,  or  Wood 
Stock,  A-7,  the  cost  of  coal,  or  wood,  without  the  statistical  information  fur- 
nished from  Form  K.  Coal  alone  will  be  described,  the  cost  of  wood  being 
found  in  a  similar  way.  Coal  Stock,  A-5,  is  built  up  as  follows :  the  debit  side 
shows  the  inventory  at  the  beginning  of  the  fiscal  period,  the  purchases  in  carload 
lots,  the  purchases  from  other  retailers  and  the  freight ;  the  credit  side  shows  the 
excess  cost  paid  other  retailers  (see  explanation  of  G-9)  and  the  inventory  at 
the  close  of  the  period  (in  red  ink).   The  debit  balance  will  now  show  the  total 


38 


Cost  x\ccoijnttng 


For  Retail  Fuei.  Dealers 


39 


cost  of  coal  sold  which  must  be  distributed  into  the  three  accounts,  G-4,  G-5 
and  G-8.  Recognizing  and  ignoring  the  error  of  omitting  degradation  and  loss, 
the  cost  of  coal  to  be  charged  into  accounts  G-4,  G-6  and  G-8  will  be  found  by 
the  following  method.  The  record  of  carlot  sales  of  coal,  kept  on  Form  F, 
shows  the  invoice  number,  which  is  the  combination  of  page  number  and  line 
number  on  the  Carlot  Purchase  Register,  and  will  enable  the  dealer  to  find 
quickly  and  summarize  the  cost  of  the  small  number  of  cars  any  retailer 
is  likely  to  sell  during  the  fiscal  period.  When  this  amount  is  charged  to  ac- 
count G-8  and  credited  to  Coal  Stock,  A- 5,  the  balance  in  A-5  will  then  repre- 
sent the  amount  to  be  distributed  between  accounts  G-4  and  G-6  and  before 
such  distribution  can  be  made  accounts  G-4  and  G-6  must  be  reduced  to  a  com- 
mon denominator. 

There  is  usually  an  arbitrarx'  difi^erential  between  the  price  of  a  ton  of 
coal  sold  at  the  yard  and  sold  delivered.  This  arbitrary  differential  may  be  the 
cost  of  delivery  or  it  may  be  a  purely  arbitrary  figure.  For  example,  in  Seattle 
the  dealers  located  in  Zone  G  make  a  difference  between  the  price  of  a  ton  of 
coal  sold  at  the  yard  and  the  price  of  a  single  ton  shoveled  off  in  Zone  G  of 
$2.20,  and  in  other  towns  the  dealers,  of  course,  will  know  the  corresponding 
difference  between  the  price  at  the  yard  and  the  delivered  price,  and  this  dif- 
ference is  the  amount  alluded  to  under  the  expression  "arbitrary  differential." 
By  the  expression  "reduced  to  a  common  denominator"  is  meant  either  to  elimin- 
ate this  arbitrary  differential  from  the  coal  sales  delivered  or  to  add  it  to  the 
coal  sales  at  yard.  Multiplying  the  number  of  tons  in  either  account  by  this 
arbitrary  differential  will  give  the  amount  to  deduct  in  the  one  case  or  to  add 
in  the  other.  When  so  reduced  to  a  common  denominator,  the  ratio  which  the 
balance  in  each  account  bears  to  the  other,  when  so  reduced,  marks  the  ratio 
for  dividing  the  cost  remainder  in  coal  stock  between  accounts  G-4  and  G-6. 

The  gross  margin  per  unit  means  the  difference  between  the  selling  price 
and  the  prime  cost,  and  this  is  found  by  deducting  the  total  prime  cost  of  coal 
sold  delivered,  or  at  the  yard,  from  the  total  sales  delivered,  or  at  the  yard,  af- 
ter eliminating  certain  necessar}^  items  as  packing  and  sales  allowances,  G-2 
and  G-3,  and  then  dividing  the  remainder  by  the  number  of  tons  sold  delivered 
or  at  the  yard,  as  the  case  may  be.  When  the  cost  of  the  coal  sold  in  each  of 
these  accounts  is  found  by  the  statistical  or  long  method,  using  Form  K,  then 
the  gross  margin  per  unit  is  the  true  average  gross  margin.  But  when  the  short 
form  is  used  the  result  not  only  contains  the  error  of  omitting  degradation 
and  loss  but  also  the  other  error  which  comes  from  dividing  the  cost  of  coal 
sold  (as  determined  by  the  balance  in  coal  stock)  into  two  accounts  by  pro- 
portion after  reducing  them  to  a  common  denominator.  This  last  error  is  oc- 
casioned by  the  assumption  that  the  proportion  of  sales  of  high  priced  coal  and 
low  priced  coal  is  the  same  in  coal  sold  delivered  and  coal  sold  at  the  yard, 
vv^hich  may  not  be  true. 

As  pointed  out  in  the  description  of  account  L-8,  the  30  cents  per  ton  profit 
allowed  by  the  United  States  Fuel  Administrator  in  Seattle  meant  30  cents  added 
to  the  sum  of  the  prime  cost  and  the  operating  cost  to  determine  the  selling  price 
of  a  single  ton  shoveled  off  in  the  basic  zone.  When  two  or  more  tons  were 
sold  in  the  basic  zone  the  price  was  2S  cents  per  ton  less,  thus  allowing  only  5 
cents  per  ton  profit.  This,  however  was  equalized  by  allowing  a  profit  of  65 
cents  per  ton  in  the  next  zone,  and  80  cents  per  ton  in  the  next  and  with  corre- 
sponding increases  in  the  succeeding  zones.  Hence,  the  average  net  profit  must 
not  be  confounded  with  the  30  cents  allowance  of  the  Fuel  Administrator. 


roRM  E. 


k 


Recapitulation  of  Deliveries   and   Charges   from   Sales 
Sheets  and  of  Carlot  Sales. 

It  is  believed  that  the  columns  on  this  recapitulation  sheet  are  sufficiently 
explanatory.  The  four  Sales  Sheets  are  used  simultaneously  in  order  to  keep 
separate  from  the  beginning  the  four  kinds  of  sales  for  each  commodity,  and 
quantity  columns  are  provided  on  the  recapitulation  sheet  for  preserving  the 
totals  of  these  separations.  The  money  values  of  the  various  sales,  however, 
are  not  separated  in  the  same  way  as  the  quantities  are  separated,  but  only 
into  sales  in  carlots,  at  vard,  or  delivered.  So  far  as  the  value  of  coal  sales 
delivered  is  concerned,  it  is  immaterial  whether  the  deliveries  be  made  by 
teams,  trucks,  or  hired  equipment.  But  it  is  important  that  the  quantity  de- 
livered by  each  kind  of  equipment  be  known  as  the  deliveries  by  each  constitute 
a  divisor  into  some  of  the  expense  groups.  It  is  not  deemed  necessary  to  re- 
capitulate the  cash  sales  since  it  is  easier  to  dispose  of  the  cash  by  entering  it  on 
the  Cash  Book  as  soon  as  any  given  Sales  Sheet  is  completed. 

EORM  G. 

Time  Book 
and 
FORM  u.         . 

Daily  Time  Report. 

Each  laborer  whose  wage  account  is  run  through  the  Time  Book  is  re- 
quired to  make  out  and  turn  into  the  office  each  day  a  time  ticket  showing  the 
date  the  man's  name,  the  time  worked  in  various  departments,  the  total  tim^ 
the  time  at  which  he  began  work,  the  time  at  which  he  quit,  and  the  time  off 
for  noon  It  is  recognized  that  there  is  a  chance  for  error  here  in  the  division 
of  a  man's  time,  but  in  view  of  the  fact  that  the  man  has  no  interest  in  wrong- 
ly dividing  his  time,  it  is  believed  to  be  a  practical  and  sufficiently  accurate 
method  to  require  the  workman  who  knows  best  to  state  on  his  Daily  Time 
Report  as  neariy  as  he  can  the  amount  of  time  he  spends  in  each  department. 
The  only  case  where  a  workman  would  have  an  interest  in  wrongly  stating 
the'  time  would  be  to  report  the  total  as  greater  than  it  really  was,  but  this 
is  common  to  all  time-keeping  and  will  have  to  be  checked  in  outside  ways. 

Form  G  is  the  Time  Book,  one  whole  page  of  which  is  devoted  to  one 
workman  and  the  given  workman's  Daily  Time  Report  is  posted  to  his  page 
on  the  Time  Book  on  the  proper  date  line  and  in  the  proper  perpendicular 
column  corresponding  to  the  departments  in  which  he  worked.  Extra  de- 
partment columns  are  provided  on  the  Time  Book.  When  the  wage  arrange- 
ment requires  extra  pay  for  over-time  work  the  time  separation  must  be  made 
only  in  the  total  columns  and  no  attempt  should  be  made  to  separate  over- 
time from  straight-time  in  the  department  columns.  For  example,  suppose 
a  man  works  ten  hours  in  one  day  in  several  departments,  when  the  straight- 
time  time  is  nine  hours,  the  full  ten  hours  should  be  distributed  properly 
through  the  various  department  columns  indicated  by  letters  at  the  top  and 
the  only  place  where  a  separation  should  be  shown  is  that  nine  hours  should 
be  shown  in  the  Straight-Time  column  and  the  one  hour  in  the  Over-Time  col- 
umn. The  Amount  Earned  column  and  the  Amount  Paid  column  constitute 
a  very  primitive  ledger  arrangement.     Frequently  workmen  receive  something 


i"  i ' 


40 


Cost  Accounting 


: 


on  account  between  pay  days,  and  it  is  convenient  to  have  a  place  where  such 
payments  will  not  be  overlooked  on  pay  day.  This  is  a  monthly  Time  Book  and 
not  infrequently  men  are  paid  every  week.  But  is  is  not  practical  to  distri- 
bute the  pay  roll  weekly.  The  proper  method  is  to  compute  the  total  time 
for  the  month  earned  to  that  pay  day  regardless  of  how  many  pay  days  have 
occurred  in  that  month.  This  total  amount  entered  in  pencil  in  the  Amount 
Earned  column  less  the  footings  of  all  items  in  the  Amount  Paid  column  shows 
the  balance  due  and  when  this  amount  is  paid  it  should  be  entered  in  ink  in 
the  Amount  Paid  column  so  it  can  be  taken  into  account  in  the  footings  for 
the  next  pay  day.  At  the  end  of  the  month,  of  course,  the  total  amount  earn- 
ed, less  the  total  amount  paid,  is  the  balance  due. 

In  the  distribution  of  the  Time  Book  it  is  important  to  remember  that  the 
actual  time  in  each  department  should  be  entered  in  its  proper  column  without  re- 
gard to  straight-time  or  over-time.  Therefore,  the  wage  rate  for  the  different 
departments  is  neither  the  straight-time  rate  nor  the  over-time  rate,  but  it  is  the 
average  rate.  The  total  time  in  the  Over- Time  column  multiplied  by  the  overtime 
rate  and  likewise  the  total  time  in  the  Straight-Time  column  multiplied  by  the 
straight-time  rate  added  together  will  give  the  total  amount  earned,  and  the 
total  amount  earned  divided  by  the  sum  of  the  over-time  and  straight-time  will 
give  the  average  time  rate.  The  total  time  in  each  department  column  multiplied 
by  the  average  rate  will  give  the  amount  earned  in  each  department,  and,  obvi- 
ously, the  sum  of  the  amounts  earned  in  all  of  the  departments  should  equal  the 
total  amount  earned.  Having  found  the  amounts  earned  in  each  department 
by  each  workman  through  the  month,  the  recapitulation  is  made  by  putting 
together  all  the  amounts  earned  in  department  A  by  all  the  men  who 
worked  in  department  A  and  likewise  through  all  the  departments.  Finally, 
a  journal  entry  is  made  charging  Labor  Unloading  Coal,  U-1,  with  all 
amounts  earned  in  Department  A,  charging  Team  Unloading  Coal,  U-2,  with 
all  amounts  earned  in  Department  B  and  likewise  through  all  departments 
crediting  the  total  to  Accrued  Wages,  L-5.  Account  L-5  will  then  show  a  credit 
balance  equal  to  the  unpaid  balances  due  all  the  men.  Labor  caring  for  teams 
should  be  charged  to  account  D-9,  labor  caring  for  trucks  should  be  charged  to  ac- 
count D-15  if  it  be  repair- work,  or  to  account  D-16  if  it  be  cleaning  trucks. 
Work  done  by  the  men  for  which  there  is  no  department  shown  on  the  Daily 
Time  Report  should  be  reported  on  the  back  of  the  Daily  Time  Report  and 
the  office  should  determine  the  proper  account  to  charge.  Care  must  be  used 
that  labor  performed  outside  of  the  business  is  not  charged  into  one  of  the 
expense  groups.  If  some  labor  be  done  for  the  proprietor  as  an  individual, 
such  item  should  be  charged  to  Proprietor's  Drawing  Account,  L-9.  If  work 
be  done  repairing  buildings  or  something  around  the  yard,  it  is  a  proper 
charge  to  account  M-3,  for  it  is  outside  of  the  business,  as  explained  under 
account  O-l.  Rent  should  be  charged  in  the  monthly  expense  even  though 
the  proprietor  owns  the  property,  and  therefore,  some  miscellaneous  outside 
account  like  M-3  should  be  charged  with  any  expense  such  as  a  landlord 
would  have  to  pay  if  the  property  belonged  to  an  outsider.  In  case  the  man 
was  occupied  driving  a  team  or  truck  for  others,  such  labor  must  be  charg- 
ed to  account  M-6.  Drivers  of  teams  and  trucks  must  be  cautioned  against  the 
misuse  of  lines  A  and  D  when  making  out  the  Daily  Time  Report.  A  and  D  are 
devoted  to  the  time  of  men  unloading  coal  or  wood  who  are  not  at  the  same  time 
driving  teams  or  trucks.  If  they  are  in  charge  of  teams,  or  trucks,  such  time 
should  be  entered  on  lines  B,  C.  E  or  F,  as  the  case  mav  be. 


For  Retail  Fi^el  Dealers 


41 


*>, 


k 


^ 


FORM    I. 

Order  Blank 

» 

A  loose  leaf  order  is  far  superior  to  a  tightly  bound  order  book,  and 
the  form  shown  in  Form  I  is  one  in  common  use  in  a  number  of  offices.  It 
should  be  punched  and  used  with  the  old  fashioned  Shannon  arch  or  Y  and 
E  file.  It  is  believed  that  this  order  blank  is  explanatory.  After  the  order  is 
filled,  this  blank  is  filed  in  alphabetical  order,  in  a  Y  and  E  transfer  case  No.  27 
which  can  be  obtained  in  any  stationery  store. 

FORM    J. 

Deliverv  Ticket. 

Sales  Tickets,  or  Delivery  Tickets,  are  in  such  universal  use  that  Form  J  is 
shown  merely  for  illustrative  purposes.  They  are  best  used  in  duplicate,  one 
copy  being  left  with  the  customer  as  an  invoice  and  the  other  being  signed  by 
the  customer  and  returned  to  and  filed  by  the  dealer  as  an  acknowledgment 
from  the  customer  that  the  delivery  was  properly  made.  It  is  believed  better 
to  make  the  original  entry  of  sales  on  the  Sales  Sheet,  Form  E,  and  let  the  De- 
livery Ticket  serve  merely  as  an  invoice  and  receipt  rather  than  post  to  the 
Ledger  from  the  office  carbon  copy  of  the  Delivery  Ticket  and  then  recapitu- 
late on  a  sheet  corresponding  to  Form  E.  If  this  is  not  done,  the  recapitulations 
are  not  regularly  made,  tickets  are  allowed  to  accumulate,  and  as  a  result,  the  re- 
capitulation work  is  apt  never  to  be  done.  On  the  Delivery  Ticket  the  space  left 
foi  Register  No.  should  be  filled  in  with  pencil,  the  number  being  made  up  of  the 
combination  of  the  page  number  and  line  number  of  the  Sales  Sheet.  The  De- 
livery Ticket  signed  by  the  customer  and  returned  to  the  dealer  should  be  filed  in 
a  Yand  E  transfer  case  No.  27  in  numerical  order,  as  shown  by  the  register 
number. 

FORM   K. 

Recapitulation  of  Tons  and  Cords  Sold  at  Retail. 

This  is  a  simple  multi-column  record  book  such  as  can  easily  be  pro- 
cured in  any  stationery  store,  but  to  give  an  idea  of  it  a  sample  is  shown  on  Form 
K.,  It  is  for  the  purpose  of  recording  in  columnar  form  the  quantity  of  each 
kind  of  material  sold  throughout  the  year,  or  other  cost-finding  period,  in  order 
to  determine  the  total  quantity  of  each  kind  sold  during  the  period. 


-* 

*< 


For  Retaii.  Fuei.  Dealers 


45 


r 


^. 


EXHIBIT  A 
GENERAL  LEDGER  ACCOUNTS  SHOWING  LOGICAL  ARRANGEMENT 


ASSET  ACCOUNTS  (SYMBOL  A) 


A — 1  Cash 

A — 2  Notes  Receivable 

A — 3  Accounts  Receivable 

A — 4  Reserve  for  Bad  Debts  x 

A — 5  Coal  Stock 

A — 6  Freight  on  Coal 

A— 7  Wood  Stock 

A — 8  Freight  on  Wood 

A — 9  Operating  Supplies 

A-10  Prepaid  Insurance 


A — 11  Prepaid  Rent 

A — 12  Prepaid  Credit  Associations 

A — 13  Prepaid   Commissioner 

A — 14  Miscellaneous  Deferred  Charges 

A — 15  Land 

A — 16  Buildings 

A — 17  Yard   Equipment 

A — 18  Movable   Equipment 

A — 19  Office  Furniture 

A — 20  Reserve  for  Depreciation  x 


X  Placed  among  assets  to  insure  deduction 


LIABILITY  ACCOUNTS  (SYMBOL  L) 


L — 1  Notes   Payable 

I. — 2  Accounts   Payable 

L — 3  Accrued  Interest  Payable 

L — 4  Accrued  Taxes 

L — 5  Accrued  Wages 

X  Placed  among  liabilities  to  insure  deduction 


I., — 6  Mortgages  Payable 

L — 7  Proprietor's  Capital  Account 

L — 8  Accrued   Salaries 

L — 9  Proprietor's   Drawing  Account  x 


GROSS  MARGIN  ACCOUNTS   (SYMBOL   G> 


G — 1  Coal  Sales  Delivered 

G — 2  Packing  Coal  &  Lineback 

G — 3  Sales  Allowances  on  Coal 

G — 4  Cost  of  Coal  Sold  Delivered 

G — 5  Coal   Sales  at  Yard 

G — 6  Cost  of  Coal  Sold  at  Yard 

G — 7  Carlot  Sales  of  Coal 

G — 8  Cost  of  Coal  Sold  in  Carlots 

G — 9  Excess    Cost    of    Coal    Bought 

Other  Retailers 
G-iO  Wood  Sales  Delivered 


from 


G — 11  Sawing  Wood  Sold  Delivered 
G — 12  Packing  Wood   and   Stacking 
(3—13  Sales  Allowances  on  Wood 
(3 — 14  Cost  of  Wood  Sold  Delivered 
G — 15  Wood  Sales  at  Yard 
(3 — 16  Sawing  Wood  Sold  at  Yard 
G — 17  Cost   of  Wood   Sold  at  Yard 
G — 18  Carlot  Sales  of  Wood 
(3 — 19  Cost  of  Wood  Sold  in  Carlots 
G — 20  Excess  Cost  of  Wood  Bought  from 
Other  Retailers 


SHRINKAGE  ACCOUNTS    (SYMBOL  S) 


S — 1  Degradation  &  Loss  on  Coal 


S---2  Shrinkage  &  Loss  on  Wood 


UNLOADING  ACCOUNTS  (SYMBOL  U) 


U — 1   Labor  Unloading  Coal 
T' — 2  Team  Unloading  Coal 
U — 3   Truck  Unloading  Coal 


U — 4  Labor  Unloading  Wood 
U — 5  Team  Unloading  Wood 
Y — 6  Truck  Unloading  Wood 


DELIVERY  ACCOUNTS   (SYMBOL  D) 


D — 1   Labor  Delivering  Coal  by  Teams 
P — 2  Labor  Delivering  Wood  by  Teams 
D — 3  Labor  Delivering  Coal  by  Trucks 
l> — 4  Labor  Delivering  Wood  by  Trucks 
D — 5  Coal  Delivered  by  Hired  Equijjment 
D — 6  Wood  Delivered  by  Hired  Equipment 
D — 7  Electric  Wagon  Loader  Expense 
D— ^8  Depreciation  on  Wagon  Loader 
D — 9  Feed,   Shoeing  &  Barn  Expense 
D-10  Repairs  on  Wagons  &  Harness 
D-11  Miscellaneous  Team  Expense 
D-12  Taxes    on    Teams,    Wagons,    Harness 
and   Team   Supplies  


D— 

D- 

D- 
D- 
D- 


D- 
D- 

D- 


13  Depreciation     on     Teams,     Wagons. 

14  Gasoline,     Oil,     Tires,     and     Truck 
Supplies 

15  Repairs  on  Trucks 

16  Miscellaneous    Truck   Expense 

17  Taxes   on   Trucks,   and   Truck   Sup- 

plies 
IS  Depreciation  on  Trucks 

19  Miscellaneous   Delivery   Expense 

20  Depreciation  on  Small  Tools 


YARD  ACCOUNTS    (SYMBOL   Y) 


Y — 1   Labor  in  Yard 
Y — 2   Demurrage 


Y — 3  Miscellaneous  Yard   Expense 


OVERHEAD  ACCOUNTS   (SYMBOL  O) 


O — 1  Rent 

O — 2  Interest  Paid 

O — 3  Interest    on    Investment    other    than 

Real  Estate 
O — 4  Salaries 

O — 5  Office  Supplies  &  Expense 
O — 6  Trade  Associations  Expense 
O — 7  Maintenance  of  Office  Automobile 
O — 8  Losses  from  Bad  Debts 


O — 9  Miscellaneous  Overhead  Expense 

O-IO  Repairs  on  Office  Furniture  &  Auto. 

O-ll  Taxes  on  Coal,  Wood,  Office  Furni- 
ture and  Automobile 

0-12  Depreciation  on  Office  Furniture  and 
Automobile 


0-13  Profit  and  Loss  from  Trading 


MISCELLANEOUS  ACCOUNTS  (SYMBOL  M) 


M — 1  Cash  Discounts  M — 5  Depreciation    on    Buildings    &    Yard 

M — 2  Rentals   and    Interest   Earned  Equipment 

M — 3  Repairs    on   Bldgs.    and   Yard    Equip.  M — 6  Outside  Teaming  &  Trucking 

M — 4   Taxes  on  Land,  Bldgs.  &  Yard  Equip.  M — 7  Miscellaneous   Outside   Income 


1 


I 


h<, 


46 


Cost  Accounting 

RXHiniT    B 
DEPRKCIATION    IN    1919 


PROPERTY 


Rate    1 1    Value    1 1  Fall  Yr.  1 1  Charged 


A — 16     Buildings: 

Coal  Bunkers. .  . . 
Office    Building.. 

Barn    

^Garage  and  Shop. 


20     % 

2%% 
2%% 
2%% 


Total  Buildings II 


A— 17 


10 
10 


Yard   Equipment: 

Railroad 

Fire    Equipment 

Old  Wagon  Scale 10 

New  Wagon  Scale,  %  year [[10 

Total  Yard  Equipment II 


%■ 

% 

% 


629 

1922 

950 

94 

113597 


.1! 


1 

I 

65 

125 

93 

125 

59 

48 

06 

48 

67 

23 

77 

23 

41 

2 

36 

2 

93 
06 

77 
36 

32  |i_200|  12||_200|12 


477 

19 

263 

318 


90          47  79   I       47  79 

88            1  99            1  99 

07          26  31   I       26  31 

^0 31   je   I 15  93 

II  1079  I  45  II    107  196  11 92  1^02 


A — 18     Movable   Equipment: 

Office  Automobile 

Truck  No.   1 

Truck  No.  2,  %  year.  . . 

Teams  

Wagons  and  Harness.  . , 
Small    Tools 

Electric  Wagon  Loiader. 


20 
20 
20 
20 
20 
20 
20 


% 
% 
% 

% 


Total  Movable  Equipment. 


810 
2017 
3507 
630 
653 
265 
870 

II  8754 


00 
45 
59 
00 
55 
87 
40 


162 
403 
701 
126 
130 
53 
174 


00 

162 

00 

49 

403 

49 

52 

233 

84 

00 

126 

00 

71 

130 

71 

17 

53 

17 

08 

174  1 

08 

86  II  1750  I  97  II  1283  129 


A— 19     Office   Furniture    II  10     %\\    552  j  42  ||       55  |  24  ||       FS  |  24 


BOOK   KNTRY 

D —  8  Depreciation   on   Electric  Wagon   Loader.... 
D — 13  Depreciation   on   Teams,   Wagons   &   Harness 

Teams    

Wagons  &  Harness 

D — 18  Depreciation  on  Trucks: 

Truck  No.    1 

Truck   No.   2 

D — 20  Depreciation  on  Small  Tools 

O — 12  Depreciation   on   Office    Furniture   and   Office 
Automobile: 

Furniture 

Automobile    

M —  5  Depreciation  on  Buildings: 

Buildings    

Yard  Equipment    

A — 20     To   Reserve  for  Depreciation 


Debit     II      Credit 


I     I 

I  126  I  00 


130 


403 
233 


1 


55 
162 


I  200 
I    92 

1 

I 


71 


49 

84 


24 
00 


12 
02 


174 
256 

637 
53 


08  11 

I'l' 

71 

33 
17 


217     24 


292 


.-11 


14 


II  1630  I  67 


For  Retail  Fuel  Dealers 


47 


EXHIBIT  C 
STATEMENT  OF  WOOD  AND  COAL  HANDLED  DURING  YEAR  1919 


k 


^\ 


COAL 

Tons  on  hand  at  beginning 372.5000 

"       purchased  in  carlots 6665.1555 

from  other  retail  dealers 371.4000 

Total  tons  to  account  for 7409.0555 

Tons  delivered  by  teams 2559.1200 

••     trucks    3261.9140 

"     hired    equipment 490.6250 

Loads  sold  delivered  6311.6590 

"     at    yard 705.2200 

Tons  sold  at  retail 7016.8790 

in   carlots    162.0500 

on  hand  at  closing 207.3075 

Total  tons  accounted  for 7386.2365 

Tons    lost    22.8190 

WOOD 

Loads  on  hand  at  beginning 333.4600 

"       purchased  in  carlots 1491.6000 

from  other   retail   dealers 37.0000 

Total  loads  to  account  for 1862.0600 

Loads   delivered    by   teams 807.0200 

*•      trucks    204.2800 

"      hired   equipment    43.7000 

Loads  sold  delivered    1055.0000 

at  yard 163.7000 

Loads  sold  at  retail ^^ 1 218.7000 

"      in    carlots    22.0000 

on  hand  at  closing 429.3400 

Total  loads  accounted  for 1670.0400 

Loads  lost  (shrinkage  resulting  chiefly  from  overload) 192.0200 


AS 


Cost  Accounting 

EXHIBIT   D 
DIVISORS  FOR  AliLOCATION   OP  EXPENSE 


Items  under  Divisor  A  were  kept  separate  on  Ledger  and  need  no  further  division. 


Divide  items  under  Divisor  B  in  ratio  of  Teamster's  time  delivering  Coal  and 
Wood,  as  indicated  by  wages  paid  as  shown  in  Ledger  accounts  D— 1  and  u— .,  as 
follows: 


D — 1  Labor  Delivering  Coal     by  Teams 
D — 2  Labor  Delivering  Wood  by  Teams 


$2396.22 
$1031.85 


=  69.99^ 
=  30.1% 


$3428.07       100.0% 


Divide  items  under  Divisor  C  in  ratio  of  Chaffeur's  time  delivering  Coal  and  Wood, 
as  indicated  by  wages  paid  as  shown  in  Ledger  accounts  D— 3  and  D— 4  as  follows. 

D — 3  Labor  Delivering  Coal     by  Trucks  —  $2508.17  =  93.43% 
D — 4  Labor  Delivering  Wood  by  Trucks  —  $  176.37  =     6.57% 

$2684.54        100.00% 


D 

Divide  items  under  Divisor  D  in  ratio  of  time  delivering  Coal  and  Wood  spent 
by  both  Teamsters  and  Chaffeurs,  as  indicated  by  wages  paid  as  shown  in  Ledger 
accounts  D — 1,  D — 2,  D — 3,  and  D — 4,  as  follows: 


Coal 


Labor  delivering  by  teams $2396.22 

Labor  delivering  by  trucks $2508.17 


Wood 

$1031.85 
$   176.37 


$4904.39 
$1208.22 


Coal  =  80.234% 
Wood=19.766% 


^$4904.39  $1208.22  $6112.61 


100.000% 


E 


Divide  items  under  Divisor  E  in  ratio  of  Tons  of  Coal  and  Loads  of  Wood  sold  at 
Retail,  that  is.  Delivered  Sales  and  Sales  at  Yard,  as  follows: 


7016.879    Tons      Coal 
1218.700    Loads    Wood 


8235.579 


85.202% 
14.798% 

100.000% 


After  deducting  2.86%  of  total  Overhead  Expenses,  as  a  proper  charge  against 
Sales  at  Yard,  the  remainder  is  distributed  in  the  ratio  of  Tons  of  Coal  and  Loads  of 
Wood  Sold  Delivered,  as  follows: 

6311.659  Tons     Coal       =  85.6787% 
1055.000   Loads  Wood   =    14.3213% 


7366.659 


100.0000% 


70 


Explanation  of  2JWr{  of  Overhead  Expenses  charged  to  Sales  at  Yard. 

The  greater  part  of  Coal  and  Wood  Sold  at  Yard,  as  distinguished  from  Sales 
Delivered,  is  sold  to  other  fuel  dealers.  These  dealers  secure  the  order,  determine 
the  credit  standing  of  the  customer,  make  the  delivery,  keep  the  account,  collect  the 
bill,  lose  the  bad  debt,  guarantee  the  quality  of  the  goods,  incur  all  mishaps  Hence 
it  is  believed  to  be  a  fair  estimate  that  four  times  as  much  overhead  is  connected  with 
the  sale  of  a  unit  of  coal  or  wood  delivered  as  when  sold  to  the  other  dealers  at  the 
yard      This  being  assumed  we  make  the  following  demonstration: 


Tons  Delivered 
Loads 

Total 

Tons  at  Yard 
Loads  " 

Total  •• 

Total    


6311.659 
1055.000 

7366.659    x    4    '=    29466.636    =    97.15% 

705.220 
163.700 


868.920  X  1     =         868.920     =       2.86% 


30335.556  100.00% 


k 


^T 


^ 


"&. 


For  Retaii,  Fuel  Dealers 

EXHIBIT  E 
ALLOCATION  OF  EXPENSES 


49 


Year  1»19 


Accounts 


Items 


Total 


Co«a 


\%'ood 


Divisor  A 

S — 1  Degradation  and  Loss  on  Coal 

S — 2  Shrinkage  and  Loss  on  Wood 

U — 1  Labor  Unloading  Coal 

U — 4  Labor  Unloading  Wood 

U — 5  Team   Unloading  Wood 

D — 1  Labor  Delivering  Coal  by  Teams 

D — 2  Labor  Delivering  Wood  by  Teams... 
D — 3  Labor  Delivering  Coal  by  Trucks.... 
D — 4  Labor  Delivering  Wood  by  Trucks. .  , 
D — 5  Coal  Delivered  by  Hired  Equipment. 
D — 6  Wood  Delivered  by  Hired  Equipment. 

D — 7  Electric  Wagon  Loader  Expense 

D — 8  Depreciation  on  Wagon  Loader 


Divisor   B 

D —  9  Feed,  Shoeing  and  Barn  Expense, 
D — 10  Repairs  on  Wagons  and  Harness. 
D — 12  Taxes  on  T.  W.  H.  &  T.  Supplies.  , 
D — 13   Depreciation  on  T.  W.  &  H 


Divisor  C 

D — 14  Gasoline,  Oil,  Tires  &  Truck  Supplies, 

D — 15  Repairs  on  Trucks 

D — 16  Miscellaneous  Truck  Expense 

D — 17  Taxes  on  Trucks  and  Truck  Supplies 
D — 18  Depreciation  on  Trucks 


Divisor  D 

D — 19  Miscellaneous  Delivery  Expense 
D — 20  Depreciation  on  Small  Tools 


Divisor   E 

Y — 1  Labor  in  Yard , 

Y — 2  Demurrage    , 

Y — 3  Miscellaneous  Yard  Expense, 


Divisor   F 

O  —  1   Rent    

O  —  2  Interest  Paid    

O  —  3  Int.  on  Investmt.  other  than  Real  Est,. 

O  —  4  Salaries    

O  —  5  Office  Supplies  and  Expense 

O  —  6  Trade  Associations  Expense 

O  —  7  Maintenance  Office  Automobile 

O  —  S   Losses  from  Bad  Debts 

O  —  9  Miscellaneous  Overliead  Expense 

O — 10  Repairs  Office  Furniture  &  Auto 

O — 11   Taxes    Coal,   Wood,   Furniture   &   Auto, 
O — 12  Depreciation   Office   Furniture   &  Auto, 


Total  Overhead 
Less 
♦2.86%   charge  against   Sales  at  Yard, 

Add 

*2.^Cy'/f   charge  against  Sales  at  Yard, 

Total  Expenses 


1535 

98 

20 

256 


674 

1070 

438 

32 

637 


14 
53 


53 
01 
67 
71 


31 
37 
86 
08 
33 


79 
17 


611  I  04 
22  I  66 

4  I  84 


I 


1140 

311 

1026 

4117 

777 

287 

433 

428 

444 

243 

60 

217 


00 
73 
76 
79 
11 
05 
43 
03 
70 
68 
59 
24 


424 

534 

1567 

686 

73 

2396 

1031 

2508 

176 

792 

47 

57 

174 


1910 


2852 


67 


83 
68 
S3 
41 
91 
22 
85 
17 
37 
30 
98 
28 
08 


92 


424 
1567 

2396 

2508 

792 

57 
174 


83 
83 

22 

17 

30 

28 
08 


I 


1335 


534 

686 
73 

1031 

176 

47 


68 

41 
91 

85 

37 

98 


73  I!  575  1  19 

I 


95  11  2665  15111  187  |  44 
I     I 


96 


638 


I 
54 


9488  11 
271  36 


54 


544 


53 


05 


13  I  43 


94  I  49 


9216  75 


I   11 


7896  79  I  1319  ■  96 


25159 
271 


25430 


03 
36 


39 


20417 
232 


20649 


32  I)  4741 
50    38 


82  114780 


71 
86 


57 


♦For  explanation  of  above  2.86%  see  Exhibit  D. 


INTENTIONAL  SECOND  EXPOSURE 


AS 


Cost  Accounting 

EXHIBIT  D 
DIVISORS  FOR   ALLOCATION   OF  EXPENSE 


Items  under  Divisor  A  were  kept  separate  on  Ledger  and  need  no  further  division. 


Divide  Items  under  Divisor  B  in  ratio  of  Teamster's  time  delivering  Coal  and 
Wood,  as  indicated  by  wages  paid  as  shown  in  Ledger  accounts  D — 1  and  D — 2,  as 
follows: 


•1  Labor  Delivering  Coal      by  Teams 
D — 2  Labor  Delivering  Wood  by  Teams 


$2396.22 
11031.85 


=  30.1% 


13428.07       100.0%, 


Divide  items  under  Divisor  C  in  ratio  of  Chaffeur's  time  delivering  Coal  and  Wood, 
as  indicated  by  wages  paid  as  shown  in  Ledger  accounts  D — 3  and  D — 4  as  follows: 

D — 3  Labor  Delivering  Coal     by  Trucks  —  $2508.17  =  93.43% 
D — 4  Labor  Delivering  Wood  by  Trucks  —  $  176.37  =     6.57% 

$2684.54        100.00% 


Divide  items  under  Divisor  D  in  ratio  of  time  delivering  Coal  and  Wood  spent 
by  both  Teamsters  and  Chaffeurs,  as  indicated  by  wages  paid  as  shown  in  Ledger 
accounts  D — 1,  D — 2,  D — 3,  and  D — 4,  as  follows: 

Coal  Wood 

Labor  delivering  bv  teams $2396.22         $1031.85         $4904.39 

Labor  delivering  by  trucks $2508.17         $  176.37         $1208.22 


Coal=80.234% 
Wood=19.766% 


^$4904.39  $1208.22  $6112.61 


100.000% 


E 

Divide  items  under  Divisor  E  in  ratio  of  Tons  of  Coal  and  Loads  of  Wood  sold  at 
Retail,  that  is.  Delivered  Sales  and  Sales  at  Yard,  as  follows: 


7016.879    Tons      Coal 
1218.700    Loads    Wood 


8235.579 


85.202%, 
14.798% 

100.000% 


After  deducting  2.86%  of  total  Overhead  Expenses,  as  a  proper  charge  against 
Sales  at  Yard,  the  remainder  is  distributed  In  the  ratio  of  Tons  of  Coal  and  Loads  of 
Wood  Sold  Delivered,  as  follows: 

6311.659  Tons     Coal       =  85.6787% 
1055.000   Loads  Wood   =    14.3213% 


Stif 


7366.659 


100.0000% 


Explanation  of  2^1%  of  Overhead  Kxpeniieii  eharsretl  to  Salen  at  Yard. 

The  greater  part  of  Coal  and  Wood  Sold  at  Yard,  as  distinguished  from  Sales 
Delivered,  is  sold  to  other  fuel  dealers.  These  dealers  secure  the  order,  determine 
the  credit  standing  of  the  customer,  make  the  delivery,  keep  the  account,  collect  the 
bill,  lose  the  bad  debt,  guarantee  the  quality  of  the  goods,  incur  all  mishaps.  Hence 
it  is  believed  to  be  a  fair  estimate  that  four  times  as  much  overhead  is  connected  with 
the  sale  of  a  unit  of  coal  or  wood  delivered  as  when  sold  to  the  other  dealers  at  the 
yard.     This  being  assumed  we  make  the  following  demonstration: 


Tons  Delivered 
Loads 

6311.659 
1055.000 

-=    29466.636 
=         868.920 

Total 

Tons  at  Yard 
Loads  " 

7366.659    x    4 

705.220 
163.700 

=    97.15% 

Total  " 

868.920  X  1 

=       2.86% 
100.00% 

Total   

...    30335.556 

For  Retail  Fuel  Dealers 

EXHIBIT  E 
ALLOCATION  OF  EXPENSES 


49 


Year  191» 


AccouutH 


Items 


Total 


Coca 


^'ood 


Divisor  A 

S — 1  Degradation  and  Loss  on  Coal , 

S  — 2  Shrinkage  and  Loss  on  Wood 

U — 1  Labor  Unloading  Coal , 

U — 4  Labor  Unloading  Wood , 

U — 5  Team  Unloading  Wood 

D — 1  Labor  Delivering  Coal  by  Teams 

D — 2  Labor  Delivering  Wood  by  Teams... 
D — 3  Labor  Delivering  Coal  by  Trucks..., 
D — 4  Labor  Delivering  Wood  by  Trucks. . 
D — 5  Coal  Delivered  by  Hired  Equipment, 
D — 6  Wood  Delivered  by  Hired  Equipment, 

D — 7  Electric  Wagon  Loader  Expense 

D — 8  Depreciation  on  Wagon  Loader 


Divisor   B 

D —  9  Feed,  Shoeing  and  Barn  Expense. 
D — 10  Repairs  on  Wagons  and  Harness. . 
D — 12  Taxes  on  T.  W.  H.  &  T.  Supplies.  . 
D — 13   Depreciation  on  T.  W.  &  H 


Divisor  C 

D — 14  Gasoline,  Oil,  Tires  &  Truck  Supplies. 

D — 15  Repairs  on  Trucks , 

D — 16  Miscellaneous  Truck  Expense 

D — 17  Taxes  on  Trucks  and  Truck  Supplies, 
D — 18  Depreciation  on  Trucks 


Divisor  D 

D — 19  Miscellaneous  Delivery  Expense 
D — 20  Depreciation  on  Small  Tools 


Divisor   F- 

Y — 1  Labor  in  Yard , 

Y — 2  Demurrage    

Y — 3  Miscellaneous  Yard  Expense, 


Divisor   F 

O  —  1   Rent    

O  —  2  Interest  Paid    

O  —  3  Int.  on  Investmt.  other  than  Real  Est,. 

O  —  4  Salaries    

O  —  ^  Office   Supplies  and  Expense 

O  —  6  Trade  Associations  Expense 

O  —  7  Maintenance  Office  Automobile 

O  —  S  Losses  from  Bad  Debts 

O  —  9  Miscellaneous  Overhead  Expense 

O — 10  Repairs  Office  Furniture  &  Auto 

O — 11   Taxes    Coal,   Wood,   Furniture   &  Auto, 
O — 12  Depreciation    Office   Furniture   &  Auto. 


Total  Overhead 
Less 
*2.86%    charge  against   Sales  at  Yard. 

Add 

*2.S6%  charge  against  Sales  at  Yard. 

Total  Expenses  


1535 
98 
20 


53 
01 
67 


256  I  71 


674 

1070 

438 

32 

637 


14 
53 


611 

22 

4 


31 
37 
86 
08 
33 


79 
17 

04  I 
66  I 

84  I 


424 

534 

1567 

686 

73 

2396 

1031 

2508 

176 

792 

47 

57 

174 


1910 


83 
68 
83 
41 
91 
22 
85 
17 
37 
30 
98 
28 
08 


92 


2852 


95 


1140 

311 

1026 

4117 

777 

287 

433 

428 

444 

243 

60 

217 


00 
73 
76 
79 
11 
05 
43 
03 
70 
68 
59 
24 


67  96 


638  54 


9488  11 
271  36 


424 

83 

1567 

83 

2396 

22 

2508 

17 

792 

30 

57 
174 

1 
28 
08 

1335 


534 

686 
73 

1031 

176 

47 


73  1!  575  119 


68 

41 
91 

85 

37 

98 


I  2665  I  51  11  187  144 

I 


54 


544 


53 


13  I  43 


9216  75 


05  II   94  I  49 

I 


I   II 


7896  79  II  1319  \  96 


25159 
271 


II  25430 


03 
36 


39 


20417 
232 


20649 


32 
50 


82 


4741 
38^ 

4780 


71 
57 


♦For  explanation  of  above  2.86%  see  Exhibit  D. 


50 


Cost  Accounting 

EXHIIIIT  F 
COST    SHEET 


AeouuutH   and   Diviiiors   for  Coal 


Sbrinkaice 

1  Degradation  and  Loss  on  Coal 
7016.879  tons  sold  at  retail. . . 


i;— 1 


InloaditiK 

Labor  Unloading  Coal 

6665.1555   tons  purchased  in  carlots 

Less 
162.0500     "       sold  "         •• 


6503.1055 


unloaded 


Yard 

See  Exhibit  E,   under  Divisor  E. 
7016.879  tons  sold  at  retail 


Delivery 


U— 1  Labor  Delivering  Coal  by  Teams *okSS?? 

U_3  Labor  Delivering  Coal  by  Trucks    Hol'll 

\  ,_5  Coal  Delivered  by  Hired  Equipment ^liH 

I ) — 7   Electric  Wagon  Loader  E.xpense o j-^« 

I) — 8  Depreciation  on  Wagon  Loader Altiio 

See  Exhibit  E,  under  Divisor  B H^tl', 

>.             ••                   "                "             C Zobo.ol 

..            «                  •»              "            D 54.53 


6311.659   tons   delivered 


Overhead 

See  Exhibit  E,  under  Divisor  F. 
6311.659  tons  sold  delivered 


Total  Expense  on  Delivered  Coal 


rOST  OF  H\NDLING  ONE  TOV  OF  DELIVERED  COAL,  EX 
CLUSIVE  OF  PACKING  CHARGE 


"AcconntB  and  Dlviabra  for  l^^ood 


Shrlnkaf^e 

S —  2  Shrinkage  and  Loss  on  Wood 
1218.700  Loads  sold  at  retail 


I'nloadiue 

U— 4  Labor  Unloading  Wood 

1491.600  Loads  purchased  in  carlots 
Less 
22.000       "        sold  •* 


1469.600       "        unloaded    

U — 5  Team  Unloading  Wood 

1469.600  Loads  unloaded 

130.000  Into  shed  without  use  of  Team 


1339.600  Loads  unloaded  with  Teams. 

Yard  „ 

See  Exhibit  E,  under  Divisor  E. 
1218.600  Loads  sold  at  retail 


Delivery 


D— 2  Labor  Delivering  Wood  by  Teams '^??M5 

D— 4  Labor  Delivering  Wood  by  Trucks. a^H 


D- 


-6  Wood  Delivered  by  Hired  Equipment. 
See  Exhibit  E,  under  Divisor  B. 

C. 
..  «  "  «'  p. 


47.98 

575.19 

187.44 

13.43 

1055.000  loads  delivered. 


Overhead 

See  Exhibit  E,  under  Divisor  F. 
1055.000   loads   delivered 


Total   Expense  on   Delivered  Wood 

roST  O^  H  VNDLING  OVE  LOAD  OF  PT^LTVEPED  WOOD.  EX. 
CLr^lVR   OF  SAWING   AND   PACKING  CHARGE 


Year  1910 


Total 


Per  Unit 
f    ct« 


424  83 


1567 


544  05 


83 


9983 


7896 


20417 


82 


79 


060545 


32 


241090 


077535 


581805 


251143 


13 


212118 


534 

68 

438730 

686 

41 

467072 

73 

91 

055170 

94 

49 

077535 

2032 

26 

1 

926313 

1319 

96 

1 

251143 

4741  1  71 

$4 

1 

1  2iri)'"n 

*' 


^ 


\ 


k 


For  Retail  Furl  Dealers 

EXHIBIT  G 
GROSS   MARGINS 


51 


Artorn'H   and    DUfyor.s 


<;— 1 

G— 2 
G— 3 


(J— 4 

»1— 5 
(1—6 

G— 7 
O— 8 

C— 9 


COAL 

Coal  Sales  Delivered 

Less 

Packing  Coal  and  Lineback $2028.17 

Sales   Allowances  on  Coal 95.02 


Less 
Cost  of  Coal   Sold  Delivered, 


GROSS  MARGIN  on  6311.659  tons. 


Coal  Sales  at  Yard 

Less 
Cost  of  Coal  Sold  at  Yard, 


GROSS  MARGIN  on  705.22  tons, 


Carlot  Sales  of  Coal , 

Less 
Cost  of  Coal  Sold  in  Carlots. 


GROSS  MARGIN  on  162.05  tons , 

Less 
Excess  Cost  of  Coal  from  Other  Retailers 

TOTAL  GROSS  MARGIN  on  7016.879  tons. 


WOOD 

G — 10  Wood  Sales  Delivered 

Sawing   Wood    Sold   Delivered $377  99 

Packing  Wood  and   Stacking 46*78 

Sales  Allowances  on  Wood 16  77 


G— 11 
G— 12 
G— 13 


G— 14 

G— 15 
(J— 16 

0—17 

G— 18 
G— 19 

r— 20 


Less 
Cost  of  Wood  Sold  Delivered, 


GROSS  MARGIN  on  1055  loads 

Wood    Sales   at   Yard 764.04 

T>pgs 

Sawing  Wood  Sold  at  Yard 58.65 


Less 
Cost  of  Wood  Sold  at  Yard. 


GROSS  MARGIN  on  163.7  loads. 


Carlot  Sales  of  Wood 

Less 
Cost  of  Wood  Sold  in  Carlots, 


GROSS  MARGIN  on  22.00  loads 

Less 
Excess  Cost  of  Wood  from  Other  Retailers. 

TOTAL  GROSS  MARGIN  on  1218.7  loads. 


RECAPITULATION 

Gross  Margin  on  COAL.... 
"      WOOD.... 


Total   Gross  Margins. 
Total  Expenses 


NET  PROFIT^ROM  TRADING  in   1919. 


lear  lOlO 


Items 


66829 
2123 


64705 
42212 


6021 
5299 


600 
600 


14 

19 


95 
46 


14 
69 


79 
79 


6272 


441  54 


80 


5831 
2165 


705 


395 


26 
43 


39 


33 


47 

47 


30 
30 


22685 
3908 


26594 
25430 


96 
38 


34 
39 


Total   II  Per  Unit 

li «   eta. 


22493 


721 


23214 
528 


22685 


49 


45 


94 

98 


96 


56379 


02301 


3665  83   3  47472 


310 


3975  89 

67  51 


06 


3908  I  38 


1  I  89407 


r   II  1163  195 


52 


Cost  Accounting 

EXHIBIT    H 

PROFIT  AND  LOSS  STATEMENT 

bor  year  1910 


G- 
G- 


G- 
G- 
G- 
G- 


COAL. 

Sales 

1  Coal    Sales    Delivered 

Liess 

2  Packing   Coal    and   Lineback 

3  Sales  Allowances  on  Coal 


Net    Coal    Sales    Delivered 

5  Coal  Sales  at  Yard 

7  Carlot  Sales  of  Coal 


Total  Coal   Sales 


Comin 

4  Cost   of   Coal   Sold  Delivered. 
6  Cost  of  Coal  Sold  at  Yard... 

8  Cost  of  Coal  Sold   in  Carlots. 

9  Excess  Cost  of  Coal  Bought 

from  Other  Retailers 


Total  Cost  of  Coal  Sold 


GROSS  PROFIT  from  trading 
in   Coal    


S—  1 


Expenses 

Degradation   &  Loss  on  Coal.... 

Unloading  Coal 

Yardage  on  Coal  (See  Exbt.  F) 
Delivery  on  Coal  (See  Exbt.  F) 
Overhead    on    Delivered 

Coal    (See   Exhibit  E)    $7896.79 
Overhead  on  Coal  Sold 
at  Yard  (See  Exhibit  E)   232.50 


Total  Expense  on  Coal  Sold 

NET  PROFIT  from   trading 
in  Coal 


WOOD 

Saleti 

G— 10  Wood    Sales    Delivered 

Less 
- — 11   Sawing  Wood   Sold  Delivered 

G — 12   Packing  Wood  &  Stacking 

G — 13  Sales  Allowances  on  Wood... 


Net  Wood  Sales  Delivered. 

G! — 15  Wood  Sales  at  Yard 

Less 
G — 16  Sawing  Wood  Sold  at  Yard 


G — 18  Carlot    Sales   of   Wood 
Total  Wood  Sales. 


Cofits 

G 14  Cost  of  Wood   Sold  Delivered.. 

G — 17  Cost  of  Wood  Sold  at  Yard 

G — 19  Cost  of  Wood  Sold  in  Carlots.  . . 
G — 20  Excess    Cost    of    Wood    Bought 
from  Other  Retailers 


Total  Cost  of  Wood  Sold 


GROSS    PROFIT    from    trading 
in  Wood  (Carried  Forward) 


424    S3 
1567  I  83 

^J4  I  Of^  II 

9983  !  82 


8129    29 


20649 


377 

99 

46 

78 

16 

17 

764 

04 

58    65 


2165 

395 

47 


43 
33 
30 


6272 


441 


82 


5831 

705 
47 


67  I  51 


6583 


80 


54 
26 

39 
30 
95 


2675 


3908 


57 


38 


PerCt.jPer  Ct. 


100.000 


^ 


68.194 


31.806 


2036  I  14 


.596 
2.198  I 
.7HZ  I 
13.988 


11.397 


28.951 


2.855 


100.000 


40.637 


59.363 


>a 


For  Retail  Fi^Ki,  Dealers 


PROFIT  AND  liOSS  STATEMENT — (Contlnaed) 


53 


Brought  Forward 


Expen«ie.<4 

--  2  Shrinkage   &   Loss  on  Wood.... 
Unloading   Wood — 

Man  labor    $686.41 

Team  labor    73.91 


Yardage   on  Wood    (See  Ex- 
hibit   F)     

Delivery  on  Wood   (See   Ex- 
hibit   F)     

Overhead  on  Delivered  Wood 
(See   Exhibit  E)    $1319.96 

Overhead   on   Wood   Sold 
at    Yard    (See    Exhibit 
E)    38.86 


534 

760 

94 
2032 

1358 


Total  Expenses  on  Wood  Sold 

NET   LOSS  from   trading   in 
Wood     


NET  PROFIT  from  trading  in 
both  Coal  and  Wood 


INCOME  FROM  OTHER  SOURCES 


M- 
M- 

M- 

M- 

M 


:—  5 


1  Cash   Discounts    

2  Rentals  and  Interest  Earned.  . . 

Less 

3  Repairs  on   Buildings   & 

Yard  Equipment $328.74 

4  Taxes    on    Buildings    & 
Yard   Equipment    171.08 

Depreciation    on    Build- 
ings &  Yard   Equip...     292.14 


M— 
M— 


6  Outside  Teaming  &  Trucking.. 

7  Miscellaneous  Outside  Income.. 


Total   Income   from  Other 
Sources     


TOTAL  PROFITS  for  year  1919, 


1080 


68 

32 

49 
25 

82 


I 


00 


791 


96 


3908 

38 

4780 

57 

872 

19 
95 

1163 

J 
1 
45  10  I 

1 

1 
1 

■ 

288 

04 

305 

252 

49 
55 

891 

18 
13 

2055 

8.121 

11.548 

1.435 
30.869 

20.637 

59.363 

72.610 

13.247 

54 


Cost  Accounting 


EXHIBIT  I 
FINANCIAIi    STATEMENT,    JANUARY    1,    1920 


ASSETS 

Current   Assets 

A —  1  Cash  on  hand  and  in  bank 

A —  3  Accounts    Receivable    

Less 
A —  4  Reserve   for  Bad  De bts 

Total  Current  Assets  

Inventories 

\—  5  Coal   Stock    

'  —  7  Wood   Stock    

A —  9  Operating    Supplies: 

Office    Supplies    

Automobile  Supplies 

Truck  Supplies   

Feed  &  Team  Supplies      

Blacksmith    Shop    Supplies 

Total    Inventories    

Deferred  Charges  to  Operations 

.\  — 10   Prepaid    Insurance     

^  — 11    Prepaid    Rent     

A — 12   Prepaid   Credit   Association    

A — 14  Miscellaneous   Deferred  Charges    

Total  Deferred  Charges   

Fixed  Assets 

A— 15  Land    

-  -16  Buildings     $3?97.32 

A   -17   Yard    Equipment    1079.45 

— 1 8  MovabU-   Equipment    8754.86 

\ — 19  Office   Furniture    552.42 

Less  

A — 20  lieserve  for  Depreciation: 

Reserve   December   31,   1918 ^3249.64 

Reserve  in  1919   1630.67 

Total    Fixed    Assets    

Total    Assets     

LIABILITIES  AND  CAPITAL 

Current  Liabilities 

L —  2  Accounts  Payable   

I^ —  4   Accrued    Taxes    

L —  r>  Accrued  Wages    

Total  Current  Liabilities 

Capital   Liabilities 

L —  7  Proprietor's    Capital    ". .  . 

Total  Liabilities  and  Capital 


6392 
44 


126 
32 
46 

196 

48 


13984 


4880 


65 

284 
115 


31 
00 


82 
70 
55 
48 
52 


05 


31 


63 
42 
35 


2664 
6348 


1309 
1009 


90 


31 

II 


03 
01 


9013    21 


451 


218 

25 

5 

40 


9723 


9103 


07 


65 
00 
75 
00 


37 


74 


2769     11 


289 


■*ts 


FORMS 


40 


465  !  40 


18827 


30898 


30433  I  43 


11 


83 


^ 


30898  I  83 


V 


^w 


Note:     This  sheet  is  commonly,  and  not  improperly,  called  the  Balance  Sheet. 


56 


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57 


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60 


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61 


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62 


Cost  Accounting 


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63 


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0032053312 


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rrtsn.««>7^^|\(EH 


MAR  161994 


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END  OF 
TITLE 


